While the IRS has streamlined the approval process for a Form 1023-EZ the forms need to be filled out with the intent of compliance.

Some small groups that filed Form 1023-EZ are getting additional IRS scrutiny.

To file Form 1023-EX the charities have to meet the following conditions for the first three years of their existence, annual gross receipts of $50,000 or less and assets of $250,000 or less can file the EZ form to apply for tax exemption.

IRS approves most applications, but later conducts exams on a sampling of the charities that received exemption. Auditors are eyeing ineligible 1023-EZ filers, groups that operate gaming activities, organizations that make donations to a single individual or family, and other issues.

If your NFP is looking to exceed these expectations before the time period, I would recommend notifying the IRS.  Explaining what the original plans were and why they are being exceeded earlier than planned.  This way you have the potential for forgiveness versus the suspicion of planning on gaming the system.

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