Although nonprofits do not pursue profit as a primary purpose, they are still businesses. As such, they must have a federal employer identification number (EIN). The EIN works for a business like a Social Security number does for individuals, so it's important to learn what it is and how to apply for one as a nonprofit.
- Because a nonprofit is considered a business entity, it must have an employer identification number (EIN).
- An EIN is like a Social Security number for your organization and can be used for various tasks including applying for a business loan, licenses, and permits or filing tax forms.
- You should apply for an EIN as soon as your organization has been legally set up as an incorporated nonprofit in your state.
- To obtain an EIN, you can download, print, fill out, and fax or email IRS Form SS-4 or apply online.
What Is an EIN?
All businesses (including nonprofits) need an employer identification number (EIN). The EIN is, basically, a Social Security number for your organization.
The EIN is formatted like this: 12-3456789. It is issued by the IRS and can be used for all of your organization's business, legal, and reporting activities.
Other names for the EIN include federal employer identification number (FEIN) and federal tax identification number (TIN).
Does a Nonprofit Need an EIN?
Because a nonprofit is a business entity, it must have an EIN. Also, despite its use of the word "employer," a nonprofit organization that only uses volunteers or a mixture of volunteers and paid staff needs an EIN. That's because the EIN is used for many business tasks such as:
- Opening a business bank account
- Applying for a business loan
- Applying for local business licenses and permits
- Reporting and paying payroll taxes
- Filing tax forms, such as the annual Form 990
When To Apply for an EIN
You should apply for an EIN as soon as your organization has been legally set up as an incorporated nonprofit in your state. You do not have to wait for the IRS to approve your organization as a tax-exempt nonprofit. In fact, you'll need that EIN to apply for 501(c)(3) status.
The person applying for the EIN must be a "responsible and duly authorized member or officer of the exempt organization." That person will use their personal social security number for the application.
Once the EIN is established, no personal social security number will be needed.
Besides their social security number, the person applying for the EIN will need to have your organization's legal name and both the mailing address and the physical address of your organization.
How To Obtain an EIN for a Nonprofit
There are two ways to obtain an EIN for your nonprofit:
- Download IRS Form SS-4 from the IRS website. Fill out the form and fax or mail it in.
- Apply online and have the confirmation letter emailed to you. Online application is the preferred method and the fastest.
Also, it is a good idea to print out the SS-4 and fill it out before you tackle the online form. If you don't do this, the online form could expire before you finish.
Once you have the EIN, you can use it on all the documents for your nonprofit, from applying for a bank account to filing your annual tax form (known as the 990).
Once obtained, it is essential to protect your EIN just as you protect a personal Social Security number.
Frequently Asked Questions (FAQs)
Does a 501(c)(3) need a Federal EIN?
Yes, a 501(c)(3), also known as a public charity or charitable nonprofit, is a business entity. As such, nonprofits need an EIN to conduct routine business activities. Even if the nonprofit has no paid employees, it must apply for an EIN right away to open a bank account, hire employees, or apply for applicable licenses. Some states require businesses, including nonprofits, to attain a state EIN as well. Check with your state about requirements and how to apply.
How do I get an EIN for my nonprofit?
As soon as you incorporate at the state level, apply to the IRS for your EIN. You must do this before you apply for 501(c)(3) tax-exempt status.
The EIN serves as your organization's Social Security number. You'll need information about your business entity, such as the date formed, and an official representative of your organization will need to apply. That person will use their personal social security number, but there will be no more need for personal numbers after the EIN is activated.
Is EIN mandatory for a nonprofit?
Yes, all businesses must file for an EIN to conduct business operations and file tax documents. A nonprofit is a business entity and is usually incorporated. An EIN is needed before an organization can file for its tax-exempt status from the IRS. Apply for the EIN right after forming your nonprofit corporation and apply for tax exemption within 27 months.
Is an EIN proof that an organization is tax-exempt?
The answer is no. The document that proves that a charity has been granted tax exemption is the IRS Determination Letter.
Every 501(c)(3) organization receives this document when granted their tax-exempt status. The letter should be kept safe and shared with anyone who asks to see it.
A charity that has forgotten about or misplaced its determination letter may try to prove its tax-exempt status by saying, "We have an EIN." Unfortunately, that won't work.
If the charity cannot find the determination letter, there is a solution. The organization can download a copy or fill out a form to obtain a new letter.