When starting a nonprofit, organizations must immediately register with the Internal Revenue Service (IRS) for an employee identification number (EIN). They will quickly see this number’s importance when they start their organization and file crucial financial and tax documents. In this article, we talk about the nonprofit EIN, when nonprofits need it, and more –…
When starting a nonprofit, organizations must immediately register with the Internal Revenue Service (IRS) for an employee identification number (EIN). They will quickly see this number’s importance when they start their organization and file crucial financial and tax documents.
In this article, we talk about the nonprofit EIN, when nonprofits need it, and more –
An EIN or Employer Identification Number is a nine-digit number the Internal Revenue Service (IRS) provides organizations. For nonprofits, this number is also known as the Nonprofit Tax ID Number.
This is much like the social security number for organizations. In some cases, nonprofits that operate under a larger organization may not need this number. Still, most nonprofits must apply for an EIN before filing for tax-exempt status, paying payroll taxes, and more. Let’s take a look at all the uses of a nonprofit EIN in the following section.
Organizations must file several forms when starting a new nonprofit. They must incorporate with their state, apply for an EIN, and apply Form 1023 with the IRS for tax exemption.
It’s also recommended that nonprofits file for tax-exempt status within the first 27 months of incorporation for all donations to be tax-exempt.
Some states, like Tennessee, also require nonprofits to register for an exemption from filing sales-and-use taxes. Organizations must have an EIN to file the necessary paperwork in these cases.
New nonprofits must start at least one bank account to separate finances from personal funds. Banks will need an EIN to create these accounts.
Banks and other financial institutions also require an EIN from nonprofits that apply for business loans. Some nonprofits will choose to use business loans to purchase high-cost items like land or a new location.
Some states also require business licenses, particularly for the organization to build or add to an existing location. In these cases, nonprofits must also have an EIN to apply for business licenses.
Pro tip: It’s best to contact your local government to see if your nonprofit needs a business license for any reason.
Nonprofits must also have an EIN when reporting and paying employee payroll. Nonprofits must include their EIN on W-9 forms when sending information to their employees for tax purposes.
Organizations must also include their EIN on 1099 forms sent to freelance professionals and contractors.
Finally, the IRS requires most nonprofits to file Form 990 annually to ensure they remain tax-exempt.
Pro tip: Nonprofits must file Form 990, 990-N, or 990-EZ. Check out our article on the subject for more information on which to choose.
As you can see, nonprofits will need an EIN on several occasions. Luckily, registering for an EIN is a quick and easy process.
Pro tip: It’s best to register for an EIN while filing as a corporation with your state.
When filing for an EIN, the IRS provides a detailed process for nonprofits to follow.
Nonprofits must be located in the US or US territories to get an EIN. The individual filling out the application must also have a social security or tax-payer identification number.
Organizations are limited to one EIN per person each day. This is important in case you make a mistake or accidentally click away from the website because there is a 15-minute activity limit when registering for an EIN.
Before registering for your EIN, you’ll want to have the following information on hand.
After entering the required information, nonprofits can submit their application online and receive their EIN immediately.
As you can see, new nonprofits must have an EIN to file required tax and financial documents with the IRS, financial institutions, and their state. Luckily, the process of registering for an EIN is quick and easy.
Donorbox has several guides and articles to help your nonprofit journey. Click here to access all our resources for starting a nonprofit. The Donorbox Library also consists of some highly useful resources to help you start your organization.
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In most cases, nonprofits must have an EIN to file for tax-exempt status. Churches don’t have to file with the IRS for tax exemption but may still want to register for an EIN to start a bank account and apply for loans and grants from other organizations.
No, an EIN does not automatically provide tax exemption. Nonprofits must file Form 1023 or Form 1023 EZ for tax-exempt status with the IRS.
It’s best to register for an EIN as soon as possible when starting a nonprofit.
It is entirely free to register for an EIN with the IRS.
If you’re unsure what your nonprofit’s EIN or tax ID is, there are several locations you can check, including:
Disclaimer: By sharing this information we do not intend to provide legal, tax, or accounting advice, or to address specific situations. The above article intends to provide generalized financial and legal information designed to educate a broad segment of the public. Please consult with your legal or tax advisor to supplement and verify what you learn here.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor