Employer Identification Numbers: What Nonprofits Should Know
Nonprofit founders are often surprised to learn that the United States Internal Revenue Service (IRS) requires nonprofits obtain an Employer Identification Number (also called an EIN), even if the nonprofit does not have employees.
What is an EIN?
An EIN is a unique number that identifies an organization to the IRS. The IRS requires every nonprofit to obtain an EIN, and nonprofits need EINS for numerous tasks, including, for example, filing required tax forms such as the annual Form 990, opening a business bank account, hiring employees, applying for a business loan, applying for local business licenses and permits, and reporting and paying payroll taxes.
When should a nonprofit apply for an EIN?
A nonprofit that is organized in the US should apply for an EIN as soon as the organization has been legally set up in its state of formation.
What is required for an EIN?
While anyone can apply on behalf of the organization, typically the founder or one of the initial board members will complete the application, which requires providing basic information about the organization.
How does an organization apply for an EIN?
Once the applicant is ready to apply, there are two ways to obtain the EIN:
1. Option 1: Apply online.
2. Option 2: Download the IRS Form SS-4 from the IRS website.
How much does an EIN cost?
It is free to apply for and obtain an EIN.
What does a nonprofit do with an EIN?
Once an organization receives its EIN, it should take care not to lose it.
Other things an EIN can be used for the following activities in the US:
· Filing tax returns.
· Hiring employees, if applicable.
· Posting on the nonprofit websites.
· Providing the EIN to donors on receipts.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
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