How to Get a Tax ID Number for a Charity
How to get a tax ID number for a charity allows a charity to complete any legal activities under this number.3 min read
2. Applying for an EIN
3. EIN and Tax-Exempt Status
How to get a tax ID number for a charity allows a charity to complete any legal activities under this number, including opening bank accounts, hiring employees, applying for business license applications, and filing tax forms. This tax ID is known as the Employee Identification Number (EIN).
You can establish a nonprofit by completing all necessary paperwork and requirements in order to be seen as a legal charity. This process begins with acquiring an EIN. The EIN is sometimes referred to as a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (TIN).
Why Nonprofits Need an Employee Identification Number
An EIN is similar to a Social Security number. Issued by the IRS, the EIN is used for all of an organization's legal activities, such as:
- Opening a bank account.
- Hiring employees.
- Business license applications.
- Filing tax forms.
Unlike a Social Security number, an EIN is formatted like this: 12-3456789.
The EIN is recommended because it will:
- Help organization members protect themselves by not having to use their own Social Security numbers.
- Document the charity's current address.
- Help document charitable deductions at tax time.
- Help donors find the correct charity and ensure their money is spent correctly.
- Help a charity avoid being caught in a scam because all charities have a distinct number.
Charity scams are unfortunately common. Fake charities will choose similar names as well-known charities to try to siphon funds from donors that have not searched via the charity's EIN number. Law enforcement can help combat this issue by tracking the real EIN and name against the fake entities.
Applying for an EIN
Applying for an EIN requires a person who must be a "responsible and duly authorized member or officer of the exempt organization." This person must provide:
- His or her own Social Security number.
- The legal name of the organization.
- The organization's mailing address.
- The organization's physical address.
The steps to apply for an EIN can be completed via phone, mail, fax, or online. The preferred method is online, as it is the fastest method and provides confirmation via email. Prior to completing the form, you should print a hard copy of it to be sure all necessary information is available when you start the online form. This also prevents the IRS webpage from timing out before you are done.
If you prefer, you can reach the IRS on the phone by calling 1-800-829-4933. You can also download IRS Form SS-4, fill it out, then fax or email it to the IRS. If you fax the application, it will take approximately a week to receive a response. If you mail the form, it will take between four and six weeks for it to be processed.
Most questions regarding the EIN application process and what is required can be answered by reviewing the IRS PDF Instruction Guide.
Once you receive you EIN, begin using the number on all legal documents and transactions, such as opening a bank account or filing annual tax forms. You'll no longer need to use your personal Social Security number. In some states, you need to provide your EIN number prior to applying for tax-exempt status from the IRS.
EIN and Tax-Exempt Status
If a nonprofit organization has an EIN, it is not automatically deemed a tax-exempt nonprofit. Entities that request tax-exempt status for a charity should confirm they match the requirements needed to be deemed exempt. The organization must fall into one of the following categories:
- Part of a sports competition
- Public safety testing
- Prevention of cruelty to children or animals
You can prove your nonprofit status with an IRS determination letter received at the time tax-exempt status was granted. The letter is imperative to proving tax-exempt status, to receive grant money, and to prove status to new board members who want to confirm the charity is properly certified. Keep the IRS determination letter in a secure location. If you lose the letter, the EIN cannot act as proof of tax-exempt status.
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