Does A Nonprofit Need An EIN?

Although nonprofit organizations are not for profit, there are federal and state requirements they must fulfill like any traditional business. One excellent example is obtaining an Employer Identification Number (EIN).

An EIN is a nine-digit code the IRS uses to identify businesses for tax purposes. This number is also used for other transactions, such as opening bank accounts and hiring employees. These activities are essential to any successful organization, including nonprofits.

Below, we’ll discuss whether nonprofits need an EIN and explore the step-by-step process of getting one. We’ll also outline some common mistakes you must avoid when getting an EIN for your nonprofit.

Let’s get started!

Does a Nonprofit Need an EIN?

So, do nonprofits need an EIN? The answer is yes, they do. Federal law mandates that all business entities, including charitable organizations, must have an EIN.

As mentioned, an EIN is a nine-digit number the IRS uses to distinguish business entities. It follows this format: XX-XXXXXXX and is unique to one organization.

EINs are primarily used for filing taxes, so some people refer to them as tax IDs. But aside from this, your nonprofit will also need it for the following:

Opening Business Bank Accounts

Your nonprofit will need a business bank account to manage and track its finances. However, to open an account, it must provide an EIN.

Since EINS are unique to each organization, they will help banks verify your nonprofit’s credentials. This process is similar to using your social security number to open a personal account.

In addition to your EIN, you may also have to submit additional documents, such as your nonprofit’s formation documents, bylaws, and list of board members.

Applying for a business loan

Much like traditional businesses, nonprofits can also benefit from business loans. They can provide your nonprofit with the financial resources it needs to kickstart its programs and cover unexpected expenses.

As part of their qualification process, creditors will verify if your nonprofit has fulfilled its federal and state requirements. They will ask you to provide your organization’s EIN alongside other requirements.

Hiring employees

If your nonprofit plans to hire employees later, it will need an EIN. An EIN will allow your organization to withhold income taxes and report payroll taxes. You will also need the code to complete tax forms, such as the 1099 Form and 990 Form.

Acquiring tax-exempt status

Nonprofit organizations can file for tax-exempt status with the IRS and are entitled to make specific deductions.

How to Get An EIN For A Nonprofit

Getting an EIN for your nonprofit is relatively easy. It involves the following steps:

Download & complete the IRS Form SS-4

For your nonprofit to get an EIN, it must submit a Form SS-4 to the IRS, which can be found on the official IRS website. You’ll need to provide the following information to complete this form:

• Your nonprofit’s name.
• Your nonprofit’s “Doing Business As” (DBA) name, if applicable.
• Your nonprofit’s mailing address.
• The county and state in which your nonprofit operates.
• The name and contact information of your nonprofit’s responsible party.
• Your nonprofit’s entity type.
• Reason for application.
• The date of your nonprofit’s establishment.
• Your nonprofit’s mission or purpose.

Submit your Form SS-4

Once you complete Form SS-4, you can submit it online or by mail or fax. The easiest and fastest way to get your nonprofit an EIN is through an online application. You’ll be able to get your EIN within the same day you file your form.

Meanwhile, the IRS typically takes 4 to 5 weeks to process applications submitted by mail and 4 days for forms submitted by fax.

The IRS also accepts EIN applications through the telephone, but this service is only available for international nonprofits planning to expand their US mission.

Wait for your EIN

If you filed your nonprofit’s application by mail, you must wait a couple of weeks before you get your EIN.

Common Mistakes to Avoid When Getting An EIN For Your Nonprofit

To speed up the process of getting an EIN for your nonprofit, here are some common mistakes you must avoid:

Incomplete or inaccurate forms

Incomplete or inaccurate forms can cause delays in processing your EIN application and even rejection. 

So, before you submit your Form SS-4, ensure that all required fields are filled out properly and accurately. Double-check for any typos or errors in your nonprofit’s name and address.

By carefully reviewing your Form SS-4, you can guarantee that your nonprofit gets its EIN quickly.

Going to the wrong website

These days, you can find plenty of fake EIN application websites online. These sites will guide you through the initial steps of the process, only to demand payment when you submit your application. 

Remember, EINs are free. The IRS will not charge you anything when you apply for one. You should also avoid downloading forms from other websites besides the IRS. This way, you can guarantee the documents you’re using are accurate.

Filing for an EI before formation

You must form your nonprofit first before you get an EIN. The Form SS-4 will ask you to provide your entity, which is a designation that indicates your nonprofit’s legal structure. If your organization is yet to be formed, you won’t be able to complete your application.

Ignoring application mistakes

If the IRS rejects your nonprofit’s EIN application due to a mistake on its Form SS-4, you can rectify it by contacting the IRS. Submit them a letter with the corrections you want to make.

Get Help Obtaining An EIN For Your Nonprofit

Like any traditional business, nonprofits need EINs. Without one, they cannot file taxes, open bank accounts, hire employees, or perform other essential activities.

Need help getting an EIN for your nonprofit? Inc. Authority is here to assist you.

Inc. Authority offers free LLC formation services, including EIN application. Our team of business formation specialists will help you get an EIN for your nonprofit free of charge.

At Inc. Authority, we understand how expensive business formation can be. So, we’ve made it our mission to make our assistance services free. We will waive our overhead charges, so you only have to worry about your state’s filing fees.

Visit our website here to learn more.