Latest Information 1/3/2012:
Revenue Procedure 2012-8,
which details IRS User Fees, does not
mention the Cyber Assistant. Last year, the IRS used the new User Fee
list to announce that the Cyber Assistant would not be available in 2011.
It does not seem likely the Cyber Assistant will be available in 2012.
Should you wait
for the Cyber 1023?
In October, 2009, the IRS announced a substantial savings -
$650
off the $850 User Fee - for using their "Cyber Assistant"
to prepare Your application
for 501(c)(3) status. Naturally,
many groups are asking themselves whether it makes sense
to
wait for this web-based tool. Here are some reasons you might
not
want to wait.
Continuing Delays
There have been
a number of delays in the release of the IRS Cyber Assistant.
The public
was told to expect the Cyber 1023 in 2007, 2008, 2009 and 2010.
Unfortunately, the delays continue;
when the IRS announced its fee schedule
for 2011, they also announced that the Cyber Assistant will be postponed again.
It will not be released during calendar year 2011.
27 Month
Rule
A 501(c)(3) has until the end of the 27th month after it is created to file its
exemption
application. If your organization is near the end of its 27 month
grace period, you should
not wait for the Cyber 1023. Avoiding the hassles
of missing the 27 month deadline is definitely
worth the extra money.
Delayed 501(c)(3) Benefits
501(c)(3) status offers a number of benefits
other than exemption from Federal
income tax: deductibility for contributions, bulk mailing permits, state, local
and
property tax exemptions, and eligibility for foundation grants, to name a few.
Only
you can weigh the $650 discount against the costs of postponing these
valuable benefits for your group.
Reputation
In some cases, lost benefits can be recouped once the IRS recognizes 501(c)(3)
status.
There is one benefit, though, that once lost may be gone forever: your
non-profit's reputation.
If you think there is any chance your organization will
be in the news sometime soon, don't
wait for the Cyber 1023. Savvy journalists
check the IRS website when writing articles about
local charities. A news story
pointing out that your group has not yet taken care of its IRS paperwork can do
lasting damage.
Computer Glitches
Hard working men and women are spending
years of their lives to bring us the
Cyber 1023, but of course there will be glitches.
The Cyber
Assistant will not quite be a fully interactive on-line form.
Applications will still have to be filed
the old-fashioned way - on paper,
through the mail. Special bar coding inserted by the Cyber Assistant
when
the application is printed will alert the IRS that the applicant is
eligible to pay the lower User Fee.
The glitches I know about have to do with printing your form.
Printing your 501(c)(3) application before
it is finished will result in a form with
a "Draft" watermark, and no bar codes. This
means you will not be able to
submit the form unless the Cyber Assistant software thinks it is complete.
When describing the Cyber Assistant in June of 2006, one IRS official said,
"At the
end of the day, you have to print out the 1023 and send it in. But lo
and behold, if you left
something blank that needs to be filled in, it won't print.
If you are supposed to put numbers in
a particular area and you've put text,
it won't print."
In addition to possible
confusion about when an application is "complete,"
there seems to be some question about
whether home computer printers
will be able to print bar codes that can be read by IRS equipment. This
problem seems to be behind the current delay, and it remains to be seen
how this
will be resolved.
Fees
Although using the Cyber 1023 will save your organization up to $650
in IRS
fees, it is not clear whether other fees may apply. This taxpayer-education and
private party partners on their websites. This is the real world, and these
partners,
both for-profit and non-profit, will have to recoup their costs somehow.
My guess
is that the IRS may solve the home printer problem by allowing private
party vendors to charge
a fee for printing your 501(c)(3) application using a specialized
printer.
Other
Factors
If significant numbers of organizations decide to wait for the Cyber 1023 in order
to save
$650, there could be processing delays due to an increased inventory
when the web-based assistant
is finally up and running.
A law enacted in 2006 requires the IRS to revoke the tax exempt status of
organizations
that have fallen three years behind in filing their annual reports.
Organizations
that want their exempt status back will be required to submit a
new Form 1023. The IRS plans to
publish a "Revoked Nonfiler List" in early
2011. It is not known how many revoked non-profits
will re-apply, but even
a small percentage of re-instatement applications will mean an even higher IRS
inventory of applications and even greater processing delays.
