The IRS’s Dumbest Form: The 1024-A

June 16, 2018

I’ll be upfront here. I’m not one of those folks who scapegoats and dumps on the IRS. Things like tax loopholes and tax complexities, Congress does that — with the help of some of your favorite company lobbyists like TurboTax and H&R Block. When Congress blames the IRS for that nonsense it’s like a bully holding down a classmate, slapping him with his own hands, and telling him to stop hitting himself. It makes no sense. The bully — I mean Congress — is to blame there.

But Congress didn’t design the dumbest IRS form there is. The IRS did. There were a number of ways the IRS could have fulfilled their duty. The IRS deliberately made our lives harder.

So what’s this form, this 1024-A?

It’s actually a new form for 501(c)4 social welfare nonprofits so that the IRS recognizes them. These nonprofits are the ones that have unrestricted lobbying. Lots of nonprofits have them to pass ballot initiatives that elected officials refuse to legislate on. One concession of a 501(c)4 versus a public benefit nonprofit, a 501(c)3, is that donors don’t get to deduct their donations for a 501(c)4.

Until recently, 501(c)4 nonprofits used to use the same form as many other 501(c) nonprofits, Form 1024. But now they have their own separate form.

So let’s get into why this Form for 501(c)4’s is so dumb. Let’s start with the IRS’s crazy notion of notice in the Form 1024-A:

“Most organizations operating under section 501(c)(4) are required to notify the IRS that they are operating under section 501(c)(4) within 60 days of formation by filing Form 8976, Notice of Intent to Operate Under Section 501(c)(4). If an organization doesn’t submit a timely notification, a penalty will be assessed.” [bold is mine]

Interestingly, this notice has been a requirement for awhile. Only recently was the IRS kind enough to let you know that the notice was required by placing it on the actual form. It used to just be a gotcha-style fine. That fine is no joke either. If you don’t file the special form within 60 days of incorporation, then you get fined $20 each day after for up to $5,000. Of course you have to research to find the actual penalty. That’s a stiff penalty considering this form used to not even tell you about the notice requirement.

But wait a minute. Isn’t the Form 1024-A giving notice to the IRS that you’re starting a 501(c)4? Common sense says it is since it’s the only type of nonprofit this form applies to. But the IRS doesn’t care about things like your common sense . In fact, silly, they tell you flat out that they thought you’d say that:

“Submission of Form 1024-A doesn’t satisfy the requirement to provide notice to the IRS. See instructions for additional information regarding the notification requirement.” [bold is mine]

See? They don’t care. And that other form? It’s $50. The silver lining is that you can complete this notice form online. That online submission also sounds like common sense to increase efficiency, but we’ve already established that the IRS doesn’t care about that. To illustrate further, the IRS has told nonprofits that they’ve been working to simplify the procedure for IRS nonprofit recognition and put it online. They said that for decades. Finally, they realized how stupid it looked on their form given their lack of progress, so they’ve since removed it.

Let that sink in. After decades, the entire IRS couldn’t handle creating a simple online form for 501(c)3 (and other) nonprofits. They attempted to do this, but it was too hard for them.

So it looks like if you want a 501(c)4, then you’ve got to pay $50 and submit that online 501(c)4 notice form. But don’t forget, the Form 1024-A also requires a fee. But before you get your checkbook out, just be aware that you have another step. The 1024-A requires you to go find another form, Form 8718, just so you can pay the fee. They’re saying here that just including a check with the form here — like they let you do in any other case — would be too overwhelming. Note that the form for public benefit nonprofits, 501(c)3 organizations, don’t do this craziness with their Form 1023 (also used for other nonprofit variations).

Fine, screw it. Let’s fill out that dumb form and be over with it. How much is it?

The form doesn’t say! That’s right, it’s nowhere. Look hard. It’s not there. You have to go through and Google it before you find this page. Really, there’s no logical navigation to get to it on the IRS site. You’ve got to use an outside search engine and make sure you’ve got some good search terms.

Finally, you’ve got a number, $600. Get that checkbook ready.

As an equal opportunity time waster, the IRS doesn’t tell you how much the fee is for public benefit nonprofits either. The Form 1023 for public benefit nonprofits literally tells you to search their site for it. To no one’s surprise, the search term they give you doesn’t even produce first-page results. To tease you, there’s a result explaining that the form does have a fee. They even go as far as to explain the concept of a fee in case you happen to be as incompetent as they are.

But they want you to continue on your scavenger hunt. Anyway, you’ve got to Google that shit again if you want to save the world with your nonprofit. It’s also $600, $250 less than it recently was. They used to actually tell you the fee on the earlier version of the form with the more expensive fee. But I guess they figure they’re getting the financial difference from you through the value of your time.

So that was ridiculous as hell. This form for 501(c)4’s makes you give an awkward sort of double notice, it requires its own separate form just to pay for it, and then you have to spend more time figuring out how much the form costs because the IRS can’t be bothered to include it on the form itself.

But there’s another whopper. If you look at the form’s fine print, you’ll see this:

“Complete Parts I–IX and submit Form 8718 (with payment of the appropriate user fee). Attach additional sheets if you need more space to answer fully. Use the instructions to complete this application and for definitions of terms used in this form. For additional help, call IRS Exempt Organizations Customer Account Services toll-free at 877–829–5500, or visit our website at www.irs.gov. If you don’t submit the required information, we may return the application to you. A request for a determination under section 501(c)(4) is optional. See instructions for additional information.” [of course, the bold is mine]

That’s right. This pain in the ass form isn’t even required. It’s bureaucracy for bureaucracy’s sake.

The problem is that not every state sees it that way. Some states may ask for the pending 1024-A application or your acknowledgment letter from the IRS after it gets the IRS seal of approval. Depending on whether you have a stickler donor or are working with another demanding organization, they may ask for this, too. You see, this form doesn’t make you a 501(c)4. It just asks the IRS to acknowledge that you’re a 501(c)4. Either way, you still file the same tax forms every year (a Form 990, if you were wondering), whether you filed the initial 1024-A or not.

So it’s clear. This form is a time hole designed to be a pain in everyone’s ass who touches it. Why would anyone pull that nonsense?

When you read around in legal communities that think about this sort of thing, you hear thoughts out loud that this is a way to get back at those 501(c)4 organizations. These nonprofits are frequently vilified for their dark money and lobbying.

But to create these hurdles doesn’t solve anything. You’re creating hurdles for everyone. These 501(c)4 nonprofits are an excellent tool to bring about positive change. Those anti-corruption ballot initiatives that you see passing in multiple states? Those are organized by 501(c)4 organizations. Like the ACLU? They have a 501(c)4, too.

Organizing efforts is hard. It takes courage, time, and resources. Do we really want to limit the ability to make change only to those who have the resources to go through these senseless hurdles? Because by creating these hurdles, that’s what we do. We create a filter so that more common folks can’t leverage their power without going through a time hole — or paying someone who regularly enters this time hole for a living.

These organization options are a tool for everyone. So remember that when you hear them being bashed. And if there’s something you don’t like about them, like reporting requirements, be sure to focus on just that. Don’t insist that we add complexities to burden the folks who need it most — even if it means making it easier for someone else to push a cause that you don’t like. The US is already filled with enough concentrated power. That concentration doesn’t need to be exacerbated further.

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