Understanding Tax ID and EIN for Nonprofit Organizations

Understanding Tax ID and EIN for Nonprofit Organizations

With over a million nonprofits in the U.S. and numerous others in Canada and worldwide, your organization's Tax ID or EIN serves as a distinctive identifier. It enables donors to verify they've chosen the correct nonprofit when seeking to match their donation. 

Nonprofit founders are often surprised to learn that the United States Internal Revenue Service (IRS) requires nonprofits to get an Employer Identification Number (EIN), even if they don't have employees. 

This rule applies to nonprofits formed under U.S. state laws and many operating internationally but within the U.S. Furthermore, getting an EIN offers significant practical benefits to these organizations. It's free, easy, and quick, especially using the IRS online application. 

Additionally, before seeking tax-exempt status, nonprofits often need to complete organizational paperwork with the state, such as articles of incorporation or other relevant documents. Subsequently, they must apply for an EIN with the IRS by completing Form SS-4.

Applications for nonprofit status must be submitted online to the IRS. If an organization is eligible to apply for nonprofit status with Form 1023-EZ, the process can take as little as four weeks. For those who must file Form 1023, the process could take up to six months or longer.

This number is crucial for donors when they electronically submit their matching gift requests and is occasionally necessary on paper matching gift forms. Additionally, to be listed as tax-exempt under section 503(c)(3), an organization must have an EIN, highlighting the importance of your organization's Tax ID or EIN.

This article aims to understand further what an EIN involves and how nonprofits can obtain one, with tools like Paybee assisting in managing nonprofit donations and finances.

What is a Nonprofit EIN?

Obtaining an EIN is vital for nonprofits to establish official registration as a 501(c)(3) organization. This nine-digit identifier (formatted as XX-XXXXXXX) confirms tax-exempt status, making charitable contributions tax-deductible under U.S. law.

Think of an organization's EIN as equivalent to a social security number, uniquely identifying the entity. Each group has its own EIN, facilitating precise tracking of financial transactions, including donations and tax records, among other crucial data.

While some nonprofits operating under a larger entity might not require this, most nonprofits need to obtain an EIN before seeking tax-exempt status, handling payroll taxes, and other purposes.

Registering as the Responsible Party

When applying for the EIN for your nonprofit organization, you'll serve as the designated "responsible party"- so it's essential to ensure you have the necessary authority for this task. 

The IRS has designated the "responsible party" role to ensure that someone with the appropriate authorization completes the filing process. This individual or entity should have control over the organization's management, financial transactions, and disposition of its assets.

For a nonprofit, the responsible party typically includes a board member, executive director, or trustee who holds a significant position within the organization.

Where Should a Nonprofit's EIN Number Be?

A nonprofit's website is a crucial asset to ensure effective fundraising, improved donor engagement, and provision of educational resources. Incorporating the organization's EIN in multiple prominent locations across the site is imperative.

We advise nonprofits to include this information on key pages such as:

  • About Us
  • Ways to Give
  • Frequently Asked Questions
  • Dedicated Matching Gift

It's essential to note that donors may abandon their search if they need help locating their tax ID or have to navigate through various pages. Additionally, accessibility to your EIN is vital for donors submitting matching gift requests. By ensuring this information is readily available, nonprofits can maximize their fundraising potential and opportunities for matching gifts.

In Donor Communication Materials

Besides your nonprofit's website, including your EIN in various communications directed toward donors is wise. This typically encompasses:

  • Acknowledgments sent to donors
  • Receipts for tax-exempt donations
  • Follow-up emails regarding matching gifts

Not only does providing your tax ID number in these materials ensure donors have the necessary information for their matching gift requests, but it also aids in reporting their charitable contributions as tax-deductible!

Through Third-Party Resources

An organization's tax ID number may be available online through third-party platforms such as GuideStarCharity Navigator, or the IRS. While these resources can benefit donors and prospects seeking information about nonprofit causes they support, nonprofits should not solely rely on them—nor assume the provided information is always accurate and up-to-date. Therefore, it's crucial to prioritize sharing your organization's EIN through your website and communication materials.

Documents Needed for IRS Form SS-4 for Nonprofits

For your nonprofit to get an EIN, you need to complete the IRS Form SS-4 for nonprofits, you'll need the following:

  • The nonprofit's official name (as registered with the state)
  • Any trade name or DBA (Doing Business As), if applicable
  • Physical and mailing addresses of the nonprofit
  • The county and state where the nonprofit operates
  • Country of incorporation, if applicable
  • Information about the individual responsible for the nonprofit (name, Social Security number (SSN), and address)
  • Nonprofit entity type (e.g., 501(c)(3) organization)
  • Reason for application (e.g., establishing a new nonprofit, change in leadership)
  • Date of establishment or acquisition of the nonprofit
  • The primary mission or purpose of the nonprofit

Filing Options for Form SS-4 for Nonprofits

Securing an Employer Identification Number (EIN) is crucial for nonprofits, and there are several avenues to submit Form SS-4 through:

1. Online application

2. Mail or fax application

3. Telephone application (available for international nonprofits only)

Online Application Process for Nonprofits

The easiest way is to apply online:

1. Visit the IRS website and select "Apply for EIN Online."

2. Agree to the terms and conditions.

3. Provide the nonprofit's details as requested.

4. Answer questions about the nonprofit and application.

5. Review and apply.

6. Receive the EIN immediately.

This streamlined process ensures swift delivery of the EIN via email on the same day, with support from the IRS EIN online application service team. Completing the form in one session is important due to security measures, with a 15-minute inactivity timeout. This method is accessible to U.S.-based nonprofits with a valid taxpayer identification number.

Applying by Mail or Fax for Nonprofits

Alternatively, nonprofits can apply by mail or fax:

1. Download Form SS-4 from the IRS website or request a copy by mail.

2. Complete the form accurately for the nonprofit.

3. Sign and date the form.

4. Send it to the IRS via mail or fax.

5. Await processing and receipt of the EIN.

Nonprofits can choose traditional mail, though this method typically takes 4-5 weeks, and error messages may lack detailed guidance, potentially necessitating a restart. Submitting the SS-4 application by fax to either the state agency or the IRS offers another option, with processing typically taking up to four days. However, confirmation of successful delivery still needs to be provided.

Telephone Application Process for Nonprofits

For international nonprofits:

1. Call the IRS at 267-941-1099 (Monday through Friday, 6 a.m. to 11 p.m. Eastern Time).

2. Provide the necessary information to the IRS representative.

3. Receive the EIN over the phone.

Nonprofits preferring a phone application can call the Business & Specialty Tax Line during operating hours, Monday through Friday.  An agent will guide the nonprofit through the process, issuing an EIN upon completion. International nonprofits must use a non-toll-free number for assistance.

Completing Form SS-4 for Nonprofits

1. Gather the nonprofit's relevant information.

2. Fill out the form sections accurately, including general details and nonprofit specifics.

3. Sign the form appropriately.

4. Submit it online, by fax, or by mail.

After filing Form SS-4 for nonprofits, the IRS will review the application and assign an EIN. Processing times vary.

Steps to Obtain an EIN for Your Nonprofit

Navigating the process of acquiring an Employer Identification Number (EIN) for your nonprofit organization is vital for establishing official registration. Follow these steps to ensure a smooth application process:

Step 1: Gather Essential Information

Start by collecting vital details about your nonprofit, including its official name, any aliases, mailing address, physical location, and the name, along with the Social Security Number (SSN) or Taxpayer Identification Number (TIN) of the responsible individual.

Step 2: Complete the Basic Information Section

Fill out the basic information section, encompassing lines 1 to 7b on the form. Provide your nonprofit's official name, alternative names, relevant trust or estate information (if applicable), mailing address, physical location, and responsible party details.

Step 3: Specify Your Nonprofit's Type

Indicate your nonprofit's status as an LLC by checking the appropriate box on line 8a, and specify its organizational type (e.g., 501(c)(3) organization) on line 8b.

Step 4: Provide Additional Details

Finalize your application by indicating the purpose for obtaining an EIN, the nonprofit's establishment date, fiscal year-end, projected hiring intentions for the upcoming year, intention to file Form 944, primary business activity, and disclosure of any prior EIN applications.

Step 5: Sign the Form

The individual in charge or someone in a fiduciary role must sign the form, ensuring the signature aligns with the previously provided name.

Step 6: Submit Form SS-4

Choose your preferred submission method: online, fax, or mail. If opting for online submission, ensure all necessary information is readily available to prevent delays. Upon submission, you'll receive your EIN promptly.

Post-Submission Process

The IRS will promptly review your application and issue an EIN, especially if submitted online. Otherwise, anticipate receiving it by mail within approximately four weeks.

Be Cautious of Fake EIN Application Websites

When you search for "apply for EIN" online, you'll come across many sites that seem legitimate but could be fraudulent EIN application platforms. They'll guide you through the initial steps of the application, but they'll demand payment only when you're about to file. Avoid wasting your time and money on them- the process of applying for an EIN is straightforward, fast, and most importantly- free!

Common Mistakes to Avoid When Applying for an EIN for Nonprofits

When applying for an Employer Identification Number (EIN) for your nonprofit organization, it's crucial to steer clear of common pitfalls that could hinder the process. Here are some key mistakes to avoid:

Incomplete Or Inaccurate Information

Ensure all necessary details are provided accurately to ensure timely obtaining your Employer Identification Number (EIN) for your nonprofit organization. Required information includes:

  • Legal nonprofit name
  • Your legal name
  • Nonprofit address (including street, country, and state)
  • Name and Social Security Number (SSN) or Taxpayer Identification Number (TIN) of the responsible party
  • Key nonprofit dates
  • Primary nonprofit activities
  • Previous application history (if applicable)

Submitting incomplete or inaccurate information could result in application rejection due to discrepancies with IRS records.

Improper Selection Of Business Entity Type

Select the appropriate legal structure for your nonprofit organization on Form SS-4 to ensure correct taxation. Options include:

  • Nonprofit corporation
  • Other nonprofit entity types recognized by the IRS

Review your chosen entity type before submitting Form SS-4.

Missing Responsible Party

Include details of all responsible parties controlling the nonprofit organization's assets and funds in the EIN application. A complete SS-4 form should include the name, Taxpayer Identification Number, and signature of the responsible party.

Missing Appropriate Forms

Ensure all necessary forms, particularly Form SS-4, are accurately completed and submitted to the IRS for your nonprofit organization. Provide updated personal and nonprofit information to support your application.

Applying Before Incurring Tax Liabilities

Wait until your nonprofit organization is properly formed and registered with the state before applying for an EIN. When applying for an EIN, the IRS will request the approved legal name and formation date. Applying before registering your nonprofit may lead to rejection.

Handling Application Mistakes

If your EIN application is rejected, rectify the errors by contacting the IRS, updating Form SS-4, and sending a letter with the necessary corrections. Allow up to 30 days for the information to be updated in the government database. For first-time rejections, review records, make necessary changes, and resubmit the application.

The Significance of EIN Numbers in Matching Gift Programs

For most companies offering matching gift programs, obtaining the receiving organization's EIN is essential to process the matching gift request and allocate the funds effectively.

In addition to other details about the employee's donation, such as the donation amount, date, nonprofit name, and address, the EIN requirement is crucial. A copy of the donation receipt, including the EIN, is typically necessary.

Employees may struggle to submit their online match request without the organization's identification number. The request could face denial even if they submit it without an EIN.

This information is vital for the matching gift company to verify the initial donation and ensure it was directed towards a qualifying nonprofit cause. Moreover, access to the organization's official tax ID number guarantees that the employer can match their employee's donation to the correct organization.

The Role of EIN Numbers in CSR Platforms

Numerous companies with workplace giving programs utilize CSR platforms, also known as corporate giving platforms or matching gift software vendors, to manage their philanthropic efforts, often involving matching gifts.

If your donors are employed by these companies (which is quite common), they typically need to submit corporate matching gift requests through their employer's CSR software portal.

To complete their request, they must have the EIN of the organization to which they donated.

Many companies even automate their matching gift processes using corporate giving software. In such cases, donors fill out an online form the CSR platform provides. The entered donation information, including the EIN, is swiftly evaluated against the company's predetermined matching gift criteria, which usually include minimum and maximum donation amounts, eligible nonprofit types, and more.

The request is then either approved or denied; if approved, the funding proceeds to the distribution phase. Therefore, as you strive to maximize matching gifts with minimal obstacles, you must give individuals the necessary information.

Frequently Asked Questions (FAQ) about Tax ID and EIN for Nonprofit Organizations

What is the significance of Tax ID and EIN for nonprofits?

Tax ID and EIN serve as unique identifiers for nonprofits, crucial for verifying organizations and enabling tax-exempt status. They facilitate donation matching and are required for various administrative purposes.

Why do nonprofits need to obtain an EIN?

Nonprofits, regardless of employee count, require an EIN as mandated by the IRS for tax purposes. It's essential for tax-exempt status, donor verification, and administrative tasks like handling payroll taxes.

How can nonprofits apply for an EIN?

Nonprofits can apply for an EIN through various methods including an online application, mail or fax application, or telephone application for international nonprofits. Each method has its process and timeframe for receiving the EIN.

What are common mistakes to avoid when applying for an EIN for nonprofits?

Common mistakes include providing incomplete or inaccurate information, selecting improper business entity types, omitting responsible party details, and applying before registering the nonprofit with the state.

Why are EINs significant in matching gift programs and CSR platforms?

EINs are crucial for matching gift programs as they facilitate the processing of matching gift requests, ensuring funds are allocated correctly to qualifying nonprofit causes. Similarly, in CSR platforms, EINs are essential for employees to submit corporate matching gift requests, ensuring accurate evaluation against matching gift criteria and smooth processing of donations.

Concluding Thoughts: The Importance of Tax ID and EIN for Nonprofits

Understanding the importance of Tax ID and Employer Identification Number (EIN) for nonprofit organizations is essential for smoothly navigating the world of tax-exempt status and verifying donors. With countless nonprofits worldwide, having an EIN not only makes paperwork easier but also builds trust with donors. 

As mentioned, getting an EIN is necessary for tax-exempt status under section 503(c)(3), showing just how crucial it is for nonprofits. Moreover, with tools like Paybee, managing donations and finances becomes much simpler. 

By following IRS guidelines and using available tools, nonprofits can maximize their fundraising efforts and navigate matching gift programs and CSR platforms with confidence, ultimately making a positive difference in communities everywhere.

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Anastasia-Alexandra Nenova

Born and raised in South Africa, Anastasia-Alexandra is a Bulgarian writer and fighter. When she isn't writing, she's busy training or competing in Judo for South Africa. She's passionate about Judo where she is a 2nd Dan, other martial arts and fitness overall. Her dream is to qualify for the Olympic Games in Judo, and she's doing her best to turn that dream into reality.