IRS starts requiring e-filing of Form 1024

The Internal Revenue Service has revised Form 1024, “Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code,” to permit electronic filing, and is beginning to require applications for tax-exempt status to be e-filed.

Starting Monday, Jan. 3, applications for recognition of exemption on Form 1024 have to be submitted electronically online at Pay.gov. However, the IRS is offering a 90-day grace period during which it will continue to accept paper versions of Form 1024 (Rev. 01-2018) and letter applications.

“Electronic filing makes it easier to complete an application for tax-exempt status while reducing errors,” said Sunita Lough, commissioner of the IRS Tax Exempt and Government Entities division, in a statement Monday. “Electronic filing also shortens IRS processing time so applicants won’t wait as long for a response.”

Organizations that are asking for determinations under Section 521 of their tax-exempt status are now also able to use the electronic Form 1024 instead of Form 1028, “Application for Recognition of Exemption Under Section 521 of the Internal Revenue Code.”

The required user fee for Form 1024 will stay at $600 for 2022, but applicants will need to pay the fee through Pay.gov when submitting the form. The payments can be made directly from a bank account or by credit or debit card.

The move is part of an overall effort by the IRS to expand e-filing by nonprofits and other tax-exempt organizations, especially as the agency remains challenged by a backlog of millions of paper tax returns, information returns and other correspondence that have accumulated during the pandemic. IRS officials discussed the expansion of Form 1024 e-filing during a meeting with the American Institute of CPAs last month (see story).

In conjunction with Monday’s announcement, the IRS issued Revenue Procedure 2022-08 , which modifies Rev. Proc. 2022-5 to allow for the new electronic submission process on www.pay.gov of Form 1024. The revenue procedure provides the 90-day transition relief period, during which paper Form 1024 and letter applications will be accepted and processed by EO Determinations. The earlier Rev. Proc. 72-5 and Rev. Proc. 2015-17 are being modified and superseded by the new revenue procedure.

As part of the revision, applications for recognition of exemption under Sections 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), (29) and 501(d) can no longer be submitted as letter applications. Instead, these requests need to be made on the electronic Form 1024. Thus, organizations that are described in Section 501(c) (other than 501(c)(3) and (c)(4)) and 501(d) applying for tax-exempt status, now need to use the electronic Form 1024. Section 501(c)(3) organizations must continue to use Form 1023 or Form 1023-EZ, and Section 501(c)(4) organizations will continue to use Form 1024-A. Those forms also need to be filed electronically.