Q: Is there any penalty for a startup if it files an IRS Form 1023-EZ instead of Form 1023 in my situation?
Form 1023 instructions mention that a Form 1023-EZ could be filed if if gross receipts in each tax year is "normally not more than $5,000," but the nonprofit has not yet requested donations. What if I file the less expensive Form 1023-EZ (nonprofit currently has $0; I'd have to use my personal credit card and I have $0 personal income), but it turns out that the nonprofit is "popular" so it gets in a lot more money than $5,000 each year? Is there an IRS penalty/fine for not being enthusiastic enough to think that nonprofit could get more than $5,000 each year and file the 1023-EZ? How am I supposed to know how much people will donate?
A: Whoa Nellie; you are allowing the wagon to get out ahead of the horses. Most lawyers answering questions here on Justia are very experienced, and give excellent advice about real problems; however, none of us use crystal balls to foretell future happenstances. This is especially true in business situations, where many new start-ups have no idea what the real business world is all about. In short, all your important small business questions should be directed to your business lawyer (or CPA, if a business tax question). If you have not consulted or retained a business lawyer (or CPA) you are encouraged to do so--before you make very costly mistakes adversely affecting the future of your valuable small business.
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