Key Takeaways:

  • Nonprofits and W-9 Forms: Nonprofits may need to fill out Form W-9 when receiving payments from businesses or government entities.
  • Filling Out the Form: Nonprofits should include their name, tax classification, and EIN while ensuring they mark their tax-exempt status.
  • Why W-9 Matters: It helps establish a nonprofit's tax-exempt identity and prevents unnecessary tax withholding.
  • When a Nonprofit Needs a W-9: Generally required when a nonprofit provides services, rents property, or receives certain types of payments.
  • Alternatives to W-9: In some cases, nonprofits may provide Form W-8BEN or Form 8233 instead.
  • Common Mistakes: Incorrect entity classification, using a Social Security Number instead of an EIN, and failing to indicate tax exemption.

Instructions on how to fill out the W-9 form for nonprofits are available on the IRS website. You will basically need to enter details, like your organization's name and address, type of entity, EIN, and the type of income.

What Is Form W-9?

All taxpayers must report their annual income to the Internal Revenue Service (IRS). You are required to withhold taxes while making certain types of payments. You must deposit the collected taxes with the IRS within the stipulated time. In order to ensure compliance, the IRS has set up a dual-reporting system wherein you must report the information relating to the payments made and the amounts of tax withheld.

You will need certain information to prepare and submit an informational report to the IRS. Form W-9, officially known as Request for Taxpayer's Identification Number and Certification, provides you (the payer) with this information.

Whenever you hire a nonprofit organization, an independent contractor, or any other third party, you should ask for a duly filled out W-9 form. You should keep all these forms on file and use their information while preparing the informational report for submission to the IRS at the end of the accounting year.

Why Do Nonprofits Need to Fill Out a W-9?

Nonprofits, though generally tax-exempt, must still provide W-9 forms when receiving payments that require reporting to the IRS. Some common scenarios where a nonprofit may need to complete Form W-9 include:

  • Receiving payments for services provided (e.g., consulting, training, or speaking engagements).
  • Rental income from leasing out property.
  • Receiving grant funds or vendor payments.
  • Engaging in financial transactions requiring an official taxpayer identification number.

Businesses issuing payments exceeding $600 to a nonprofit will often require a completed W-9 for tax documentation purposes. Even though nonprofits generally do not pay income taxes, this form verifies their tax-exempt status and ensures proper reporting.

How to Fill Out Form W-9 for Nonprofits

Although nonprofit corporations may be exempt from taxes, they must complete the W-9 form while receiving certain payments. Here is how you should fill it out:

  • Name: Enter the name of your nonprofit corporation as it appears in your Articles of Incorporation.
  • Business Name: If your organization operates under a name different from its registered name, enter that name here.
  • DBA: Leave it blank unless you are conducting business under a registered trade name.
  • Entity Type: All nonprofit organizations are corporations. Hence, check the box corresponding to C-corporation. Alternatively, you can also choose “Other” in the entity type and write “nonprofit corporation” in the provided space.
  • Exempt Payee Code: If you are a charitable organization, you can leave this section blank. Others should consult their tax adviser for the appropriate code.
  • Federal Tax Classification: Check the “Other” box and write something like “nonprofit corporation exempt under section 501(c)(3) of the IRS.”
  • Type of income: Check “Other Income” if the income does not relate to services of your organization. For instance, lottery winnings would come under “other income.” For all other income, you should choose “Non-employee Compensation.”
  • Address: Enter the mailing address of your organization.
  • Taxpayer Identification Number: Enter your Employer Identification Number (EIN) issued by the IRS. If you do not have an EIN, you can apply for it online or by filing Form SS-4 with the IRS. If you've applied for an EIN but haven't received it yet, write something like “applied for” in this space.
  • Social Security Number: Leave it blank.
  • Certification: In this section, you certify that the information provided in the form is true and correct to the best of your information. Put your signature and enter the date.

Common Mistakes Nonprofits Should Avoid on a W-9

Filling out a W-9 incorrectly can lead to issues such as unnecessary withholding taxes or IRS scrutiny. Here are some common mistakes nonprofits should avoid:

  1. Incorrect Entity Classification – Some nonprofits mistakenly select the wrong tax classification. Be sure to check “Other” and specify “Nonprofit Corporation exempt under section 501(c)(3)” to clarify tax-exempt status.
  2. Using a Social Security Number Instead of an EIN – Nonprofits should always use their Employer Identification Number (EIN) instead of a personal SSN.
  3. Failing to Indicate Tax Exemption – The IRS provides exemption codes for certain organizations. If applicable, ensure the correct code is listed.
  4. Leaving Sections Blank – Incomplete forms can lead to delays in processing payments.
  5. Providing an Incorrect EIN – Double-check that the EIN is accurate, as mistakes can cause payment issues.

By avoiding these errors, nonprofits can ensure smooth financial transactions and maintain compliance with IRS requirements.

Next Step After Filling Out Form W-9

After you complete the W-9 form, issue it to the business entity that asked for it. You need not file this form with the IRS.

Issuing Form W-9 is an important taxation procedure. If your nonprofit organization conducts business with someone that requests this form, make sure you complete it and hand over the form without delay.

Do Nonprofits Ever Need to Submit Form W-9 to the IRS?

Unlike tax returns, a Form W-9 is not submitted directly to the IRS. Instead, nonprofits provide the completed form to the entity requesting it, typically a business, grant provider, or government agency. This entity then uses the information on the W-9 to issue a Form 1099 if necessary.

If a nonprofit mistakenly submits Form W-9 to the IRS, there is no penalty, but it is unnecessary and may cause confusion in tax reporting.

Where Can You Get the W-9 Form?

  • The business entity requesting you to complete a W-9 tax form may give you a blank copy of this form.
  • Instructions for filling out W-9 forms are available on the IRS website.

The Purpose of Issuing W-9 Forms

Even though nonprofits are exempt from income tax and not subject to withholding taxes, you must fill out and issue Form W-9 to the requesting business entities. In fact, all nonprofits must submit this form in order to be eligible for the tax-exempt status. Form W-9 establishes the identity of your organization as being independent and free from the influence of any for-profit entity.

What If a Nonprofit Doesn’t Have an EIN Yet?

A nonprofit that has not yet obtained its Employer Identification Number (EIN) can still complete a W-9 by writing "Applied For" in the EIN section. However, the organization must ensure it applies for an EIN as soon as possible using IRS Form SS-4.

Without an EIN, payment processing and tax reporting may be delayed, and the requesting business may have to withhold taxes at the backup withholding rate of 24%.

Tax Exemption for Nonprofits

  • Section 501 of the Internal Revenue Code describes the tax exemption that can be granted to nonprofit organizations.
  • According to this section, a nonprofit organization must request the tax-exempt status from the IRS; it's not granted automatically.
  • A nonprofit organization requesting the tax-exempt status must meet certain criteria to be eligible for the status. Form W-9 is an important prerequisite for considering your application.

Alternatives to Form W-9 for Nonprofits

In certain cases, a nonprofit may need to provide alternative tax forms instead of a W-9:

  • Form W-8BEN: Used if a nonprofit is a foreign entity receiving U.S. income.
  • Form 8233: For foreign nonprofits claiming exemption from withholding under a tax treaty.
  • IRS Determination Letter: Some payers may request a copy of a nonprofit’s IRS determination letter as proof of tax-exempt status.

Understanding when to use these forms ensures compliance and avoids withholding tax complications.

Frequently Asked Questions

  1. Do all nonprofits need to fill out a W-9?
    No, nonprofits only need to provide a W-9 if a business or organization requests it for payments that require IRS reporting.
  2. What happens if a nonprofit does not complete a W-9 when requested?
    Failure to provide a W-9 may result in backup withholding of 24% on payments made to the nonprofit.
  3. Can a nonprofit use a personal Social Security Number (SSN) instead of an EIN?
    No, a nonprofit should always use its Employer Identification Number (EIN) on Form W-9.
  4. Is a W-9 required for grant funding?
    Sometimes. If a grant provider needs to report payments to the IRS, they may request a W-9 from the nonprofit.
  5. Where can a nonprofit get an EIN to complete a W-9?
    A nonprofit can apply for an EIN online through the IRS website or by filing Form SS-4 with the IRS.

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