For nonprofits, an EIN is critical for incorporating as a nonprofit, opening a bank account, applying for tax-exempt status, and filing yearly tax forms. It is also required for donors to ensure they’re selecting the right nonprofit when they request for their donation to be matched. 

An EIN is used as a unique identifier for the nonprofit organization in the same way that a social security number is used for individuals. In this article, we’ll answer the question of how to get an EIN for a non-profit, so let’s take you through it. 

What is an EIN for a non-profit?

An EIN for a non-profit is a Federal nine-digit tax ID number that the IRS assigns to nonprofits, charities, and other organizations. It is used for identification purposes and is required before an exemption application is submitted. Non-profits need an EIN for various reasons, including hiring employees, acquiring grants, getting permits and licenses, and opening small business bank accounts. 

An EIN is also necessary for filing tax returns, even though non-profits are tax-exempt. Non-profits cannot do these things without an EIN, and they may find that they require it quite quickly. An EIN is unique to the organization and does not expire once it has been issued.

Non-profit EIN application: Step-by-step

It’s important to note that the online application method is the quickest and most popular way to obtain a Tax ID (EIN) Number for a non-profit organization. When you follow the following steps, the application process becomes a breeze: 

  • Prepare mandatory business information: Gather all the necessary information about your non-profit organization, including its name, mailing address, date of formation, and the reason for acquiring an EIN Number now. You will also need to provide information for a board member or a registered agent who will serve as the first point of contact for anything EIN-related.
  • Apply for an EIN: You can apply for an EIN online to get it within an hour. To apply for your EIN, simply log into the IRS website and find the EIN application portal. Here you will be given a form to fill out. This form asks you questions about your business such as basic contact as registration information. 

Filing for tax-exempt status with your EIN

To file for tax-exempt status for a non-profit, you must complete IRS Form 1023, which is the application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This form is used to apply for federal tax-exempt status, which is necessary for the nonprofit to receive tax-deductible donations, access grant money, and receive income and property tax exemptions.

The form requires information about the nonprofit’s purpose, activities, finances, and governance. It is important to provide accurate and complete information, as the IRS may assign a specialist to review the application and request additional information.

If the IRS approves the application, the nonprofit will receive a determination letter granting its federal tax-exempt status. If the IRS denies the application, the nonprofit can appeal the decision.

Smaller nonprofits with less than $50,000 in annual receipts and $250,000 in total assets may be eligible to file Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3). This is a shorter, simpler application form that can be completed online.

Why do non-profits need an EIN?

Nonprofits need to apply for an EIN for several reasons:

  • State and federal tax requirements: Nonprofits are required to obtain an EIN for state and federal tax purposes. This number is used to identify the nonprofit organization for tax purposes, and it is required for filing tax returns and other tax-related documents.
  • Applying for tax-exempt status: Nonprofits must have an EIN before they can apply for tax-exempt status with the IRS. This is because the EIN is used to identify the nonprofit organization and to track its tax status.
  • Opening a bank account: Nonprofits require an EIN to open a bank account. This is because banks use the EIN to verify the nonprofit’s identity and to ensure that it is eligible for nonprofit banking services.
  • Applying for grants and funding: Nonprofits often need to provide their EIN when applying for grants and other forms of funding. This is because funders use the EIN to verify the nonprofit’s identity and to ensure that it is eligible for funding.
  • Hiring employees: Nonprofits that have employees need an EIN to report employment taxes and to obtain worker’s compensation insurance.
  • Applying for licenses and permits: Nonprofits may need to provide their EIN when applying for licenses and permits from local, state, or federal authorities.
  • Establishing credibility: Having an EIN can help nonprofits establish credibility with donors, partners, and other stakeholders. This is because the EIN is a unique identifier that is associated with the nonprofit organization and its tax status.

Overall, obtaining an EIN is an important step for nonprofits to take as they establish and grow their organizations. It is a simple process that can be done online or through the mail, and it is required for a variety of important tasks and functions.

Summary

Obtaining an EIN is an essential step for nonprofits, as it enables them to establish credibility, comply with legal requirements, and access various benefits and opportunities that are available to tax-exempt organizations. Understanding the importance of an EIN for nonprofits and the process of obtaining one, means organizations can set themselves up for success and focus on their mission of making a positive impact in their communities. 

It is important to note that nonprofits should consult with a qualified tax professional or legal advisor to ensure that they are complying with all applicable laws and regulations related to their tax-exempt status and other aspects of their operations. With the right support and resources, nonprofits can thrive and make a meaningful difference in the world.