Two IRS forms come up constantly in church finance conversations: Form 1023 and Form 990. They serve different purposes, apply to different situations, and carry very different consequences if ignored. Here is a plain-language explanation of both.

Form 1023: The Application for Tax-Exempt Status

Form 1023 is how most nonprofits apply for 501(c)(3) recognition. As covered in our 501(c)(3) guide, churches are not required to file it -- but most should. The form asks the IRS to review the organization's structure, purpose, and governance and to issue a formal determination letter confirming tax-exempt status.

There are two versions:

  • Form 1023 -- the full application, required for larger or more complex organizations. Filing fee is $600.
  • Form 1023-EZ -- a streamlined version available to organizations with projected gross receipts under $50,000 per year and total assets under $250,000. Filing fee is $275. Most new church plants qualify.

Both are filed electronically through Pay.gov. Processing times vary but typically run three to six months for the EZ and longer for the full form. Once approved, the exemption is generally retroactive to the date of formation if the application is filed within 27 months of incorporation.

Key Takeaway

File Form 1023 or 1023-EZ within 27 months of incorporating or organizing. Miss that window and you may not be able to backdate the exemption -- meaning donors cannot deduct contributions made before the approval date.

Form 990: The Annual Information Return

Form 990 is the annual information return filed by tax-exempt organizations. It is not a tax return in the traditional sense -- 501(c)(3) organizations do not pay federal income tax. It is a public disclosure document. Anyone can access a filed 990, which is exactly the point: it is the primary tool for public accountability of nonprofit finances.

The 990 reports the organization's revenue, expenses, assets, liabilities, highest-compensated employees, governance practices, and program activities. It is filed with the IRS and made publicly available through services like GuideStar and ProPublica.

Do Churches Have to File the 990?

This is the question most church leaders ask. The answer: most churches are exempt from filing Form 990. The Internal Revenue Code specifically exempts churches, their integrated auxiliaries, and conventions or associations of churches from the 990 filing requirement.

However, the exemption has limits. The following church-related entities typically do have to file:

  • Church-affiliated schools, daycare centers, and social service programs that are separately incorporated
  • Church foundations or endowment funds organized as separate legal entities
  • Any organization that lost its automatic church exemption due to a determination that it does not qualify as a church under IRS criteria
Watch Out

If your church operates a separately incorporated school, food pantry, housing ministry, or other program, that entity may be required to file a 990 even if the church itself is not. Failing to file when required triggers automatic loss of tax-exempt status after three consecutive years of non-filing. There is no warning -- the status is simply revoked.

Form 990-N: The E-Postcard

Small tax-exempt organizations with gross receipts normally under $50,000 can satisfy their annual filing requirement with Form 990-N, called the e-postcard. It is filed electronically and requires only basic information: legal name, address, EIN, tax year, name of principal officer, and a confirmation that gross receipts are under the threshold.

Even though most churches are exempt from the 990 requirement, church-affiliated organizations that do need to file and have limited revenue should use the 990-N rather than overlooking the requirement entirely.

State Filing Requirements

Federal filing requirements are only part of the picture. Many states require separate annual filings from tax-exempt organizations operating within their borders. These are distinct from the federal 990 and have their own deadlines, forms, and penalties. Churches with significant operations in multiple states should verify the requirements for each state.

How Dime Handles This

We file Form 1023 and 1023-EZ for new churches and organizations, and we advise on which version is appropriate. For church-affiliated entities that do have a 990 filing requirement, we prepare and file the return annually and make sure the public disclosure accurately reflects the organization's work.

If you are not sure whether your church or its related entities have outstanding filing obligations, reach out to our team. Unaddressed filing gaps are one of the most common compliance issues we find with new clients, and they are almost always fixable once identified.