Updated October 30, 2020:

The question, “how long does it take to become a non-profit?” is one that plagues many social entrepreneurs today. It is easy to blame the IRS for delays in receiving the 501(c)(3) determination letter.

The 501(c)(3) determination letter is the official letter notifying you that your organization is now a tax-exempt 501(c)(3) charity. However, this letter might be delayed by the IRS due to incomplete or wrong information, payment of the wrong fee, or nonpayment of fees.

Delays are Usually Caused by Applicants

This means that delays are usually caused by errors on your part. However, it can also be due to budget cutbacks in the IRS resulting in reduced numbers of IRS staff available to process applications. Other causative factors include technology failures and a backlog of application requests.

Tips for Avoiding Processing Delays

Since so many organizations fail to properly file applications, the IRS had to publish an article containing tips on how to avoid processing delays. Paying the appropriate fee is the number one tip. When filing for tax-exempt status for your nonprofit, you should strictly follow the instructions, submit complete and accurate information, and pay the appropriate fees.

Some of the benefits of obtaining the 501(c)(3) determination letter include the following

  • Legitimizes the charity.
  • Allows donors to claim donations as tax deductions on their personal/business tax returns.
  • Exempts the nonprofit from paying income and federal corporate taxes.
  • Puts nonprofits in a better position to obtain grants. Most foundations only make donations to 501(c)(3) nonprofits.

After submitting your application, it may take the IRS three to six months to get back to you. This gives them time to properly go over the application, and if there is incomplete information, they will contact you. However, having to correct errors considerably slows down the process.

To avoid a long wait time, you should understand the requirements and instructions and complete the application accordingly.

The following are some of the information you must submit along with the form

  • Description of activities
  • Article of incorporation
  • EIN
  • Policies and bylaws
  • Publications, printed materials, and financial information
  • A filing fee of $600

The process of filing Form 1023 is challenging, and care should be taken when filling the form. Individuals are advised to hire an attorney specializing in nonprofits to assist them with the application.

Understanding Form 1023-EZ

Form 1023-EZ was designed to assist smaller organizations in quickly and easily filing for 501(c)(3) tax-exempt status. The major requirement for filing Form 1023-EZ is total annual projected revenue — it must be below $50,000 each year. Organizations that fit into this category are able to use this method to quickly obtain tax-exempt status.

The IRS usually takes two to four weeks to process Form 1023-EZ. The processing time is much shorter since applicants remove the burden of scrutinizing from the IRS. You should receive feedback on your application within 90 days after the application has been submitted.

Applicants can only submit Form 1023-EZ online, thus ensuring a speedier application process. However, they must complete and file the form according to the specific requirements of the IRS.

No matter the form you choose, whether Form 1023-EZ or Form 1023, adequate preparation and attention to detail are critical to hassle-free submission and quick approval.

Individuals who are considering setting up a nonprofit should understand what the 501(c)(3) means and the qualification requirements. They should also understand the incorporation laws of their state and ensure that their organization structure meets the requirements for both incorporation and tax-exempt status.

Although incorporation is advantageous to most charities, it is not a requirement for tax-exempt status. They can choose to become an unincorporated nonprofit association.

Failure to adhere to the IRS requirements may result in delays of up to several months. One such requirement is that the applicant's article of incorporation must contain specific provisions and languages such as a dissolution clause and a purpose clause.

Preparation is key to avoiding unnecessary delays in obtaining 501(c)(3) tax-exempt status. Applicants should ensure that their organization has taken the necessary prerequisite steps. This includes creating financial projections, defining your activities, creating organizational records, and incorporation.

If you need help with determining how long it takes to become a non-profit, you can post your legal need on the UpCounsel marketplace. UpCounsel accepts only the top 5 percent of attorneys/lawyers on its site. Attorneys on UpCounsel come from prestigious law schools like Yale Law and Harvard Law and usually have 14 years of legal experience, including work on behalf of or with companies like Airbnb, Menlo Ventures, and Google.