Submitting your 501(c)(3) application is one of the most important steps in forming a nonprofit. The IRS reviews every detail to determine whether your organization meets the standards for federal tax exemption. Even small errors can lead to delays, requests for more information, or denials that require costly corrections.

Below are five mistakes founders often make when preparing Form 1023 or Form 1023 EZ, and how you can avoid them.

Why Accuracy Matters

The IRS reviews thousands of exemption applications each year. Missing information, unclear descriptions, or gaps in your documents can raise questions about your purpose or structure. When this happens, your application may stall while the IRS asks for clarification.

Chisholm Law Firm has assisted thousands of founders with nonprofit formation and exemption filings and has a strong history of approvals for the applications it prepares. This experience shows which problem areas cause the most issues.

Mistake 1: A Vague Mission Statement

Your mission statement is more than a description of your goals. It shows the IRS that your activities fit within approved charitable purposes. If the mission is too broad, too narrow, or unclear, the IRS may question whether your work meets the requirements for tax exemption.

Common mission statement problems include:

• Using general language without describing who you serve
• Listing activities that are not charitable under IRS rules
• Mixing unrelated purposes in one statement
• Describing goals rather than actual programs

A strong mission statement should clearly define your purpose and connect directly with the programs you describe later in your application.

For guidance on how to articulate your purpose, see our page on What is a 501(c)(3)?

Mistake 2: Weak Governance Policies

Your governing documents show the IRS how your nonprofit will operate. If these documents are incomplete or unclear, your application may face delays.

Weak governance often appears in:

• Bylaws that do not outline decision making procedures
• Missing or outdated conflict of interest policies
• Boards without clear roles
• Inconsistent language between bylaws and Articles of Incorporation

The IRS expects your Articles and bylaws to meet federal standards for tax exemption. Chisholm Law Firm drafts formation documents that follow these standards and helps founders avoid governance conflicts.

For more detail, see our internal links on Articles and bylaws.

Mistake 3: Incomplete Financial Projections

Form 1023 requires a detailed financial picture, even if your nonprofit is brand new. The IRS wants to see how your programs will be funded and whether your activities match your stated purpose.

Common issues include:

• Missing revenue projections
• Expenses that do not match program descriptions
• Leaving out in kind support or volunteer labor
• Inconsistent numbers across sections of the application

Your financial projections should reflect realistic expectations for your first three years. They help show that your organization can carry out the activities listed in your narrative description.

Mistake 4: Missing Required Attachments

Your exemption application must include several attachments. Missing one can cause your application to stall.

Required attachments may include:

• Articles of Incorporation
• Bylaws
• Conflict of interest policy
• Program narrative
• Budgets
• Schedules for insider transactions
• Additional explanations requested in the form’s instructions

Each attachment must match the information you included elsewhere in your application. Inconsistency is one of the most common reasons the IRS sends follow up questions.

Mistake 5: Choosing the Wrong Form (1023 vs 1023 EZ)

Many founders want to file the shorter Form 1023 EZ because it appears simpler. However, not all nonprofits qualify for it, and selecting the wrong form can cause delays or rejections.

You should use Form 1023 EZ only if:

• Your projected revenue stays under IRS thresholds
• Your programs fit within the EZ eligibility list
• Your state of incorporation is eligible
• Your governing documents contain required IRS language

If your programs involve grants, complex revenue streams, or activities that need explanation, the long form may be the better route. Chisholm Law Firm helps founders determine which form fits their structure and prepares both versions of the application.

For related guidance, see 7 reasons applications get rejected and Benefits of 501(c)(3).

When To Hire an Attorney

Form 1023 is a legal document that shapes your nonprofit’s future. Many founders choose support when:

• They want help drafting Articles and bylaws
• Their activities involve grants, partnerships, or programs needing clarification
• They want to prevent delays
• They received an IRS request for more information
• Their first attempt was denied

Professional guidance can help you submit a complete application that reflects your mission and meets IRS expectations.

FAQs

How many nonprofits get rejected?

Rejection is not common, but many applications receive follow up questions that slow down approval. Clear documents reduce these delays.

Can I correct Form 1023 after filing?

Yes. You can respond to IRS requests for clarification. Some errors can be corrected before the IRS makes a final decision.

Should I use 1023 EZ?

It depends on your size, programs, and structure. Smaller nonprofits may qualify, but many organizations require the long form.

What documents must be attached?

Your Articles, bylaws, conflict policy, financials, and program narrative are the most common attachments. Some organizations need to include additional schedules.

Can Chisholm Law Firm review my application?

Yes. Chisholm Law Firm reviews, revises, and prepares 501(c)(3) applications for founders across the United States.