IRS Improperly Granted Charity Status to EZ Filers

by Gary Snyder

The Internal Revenue Service improperly granted tax-exempt status to more than a third of nonprofits that used a new short-form application, according to the National Taxpayer Advocate’s annual report to Congress. 

The report suggested that the agency rubber-stamped applications rather than subjecting them to the most basic review. The IRS first offered the three-page form in July 2014 for organizations with gross revenue of $50,000 or less and assets of $250,000 or less. For qualifying applicants, it replaced a 26-page form. The agency said the new form would help reduce a backlog of applicants, while critics complained that the longer form helped weed out cheats. 

In a study of 408 nonprofits in 20 states, the advocate’s office found that 37 percent of applicants using the 1023-EZ application form did not meet the organizational test required of nonprofits. 

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