Getting back your nonprofit 501(c)(3) status is difficult, but it can be done, and removing the fear of the unknown will help you start the process. Before getting it reinstated, you need to know the costs associated with the process. These include application and reinstatement fees from the IRS, possible penalties, and the costs of professional help if you choose to get it.
Cost of IRS Forms for Nonprofit 501(c)(3) Status
The IRS charges a reinstatement fee. This fee depends on the form you decide to submit:
- Form 1023-EZ – $275: If your nonprofit made less than $50,000 in gross annual receipts and has under $250,000 in total assets, you can submit the 1023-EZ form. This is the cheapest and the fastest option available to you.
- Form 1023 – $600: Other nonprofits that are bigger and more complex and need to submit the basic Form 1023, which requires more detailed documents of the nonprofit’s structure, finances, and operations to be provided. This option costs $600.
- Form 1024 or 1024-A – $600: This designates other types of tax-exempt entities and is issued the same $600 cost. These entail social welfare organizations and trade organizations.
All payment submissions are nonrefundable and are made electronically through Pay.gov during filing, even when reinstatement denial by the IRS occurs.
Cost of Professional Help
Nonprofits are able to independently submit reinstatement applications, however, they often hire CPAs, tax attorneys, or nonprofit compliance consultants to help improve efficiency and confirm accuracy. Professional service fees range from:
- $500 − $1,000 for simple cases handled under Form 1023-EZ.
- $1,000 − $3,000 or more for larger organizations or cases involving retroactive reinstatement with detailed documentation.
Although total costs will increase when experts are hired, errors and delays from the IRS can also be avoided by the experts, saving you money in the long run.
Penalties and Missed Filings
If your nonprofit operated during the period of revocation, the IRS will forcibly require you to submit back Form 990s or stuck credits, and you will compromise penalties and interest. This depends on how long the nonprofit was noncompliant and if taxable income was earned.
Conclusion
IRS fees for reinstating a 501(c)(3) is, on average, $275 − $600, plus other professional and filing-related costs. The reinstatement process may take a substantial amount of time and documentation. However, once reinstatement is granted, a nonprofit is able to receive tax-deductible donations, apply for grants, and regain the confidence of the general public. If you need professional assistance, reach out to Dimov Tax. Our team presents expert support to nonprofits