Charitable
Helping the needy and solving societal problems like poverty, hunger, or homelessness. Examples include homeless shelters or disaster relief organizations.
Apply For a Nonprofit Tax ID Quickly & Easily
Have you started a nonprofit and are wondering if you need an EIN? Or do you need a nonprofit tax ID but are unsure how to get one?
Well, you’ve reached the right place. In this in-depth guide, you’ll find everything you need to know about how to get a nonprofit tax ID.
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What is a Nonprofit Organization?
Unlike traditional businesses, nonprofit organizations are motivated by social, ideological, political, or environmental goals—rather than by profit. All revenue they generate goes toward fulfilling these goals instead of being redistributed as earnings to shareholders.
Because they lack a profit motive, nonprofit organizations qualify for tax-exempt status under Internal Revenue Code (IRC) 501(a) as described in IRS Publication 557. Some examples of nonprofit organizations are educational institutions, advocacy groups, and religious institutions.
Want to get a nonprofit tax ID yourself without any help? Read our step-by-step instructions on how to get one.
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Advantages of Forming a Nonprofit Company
Before we get into the details of how to form a nonprofit and get a nonprofit tax ID, let’s first understand why you should form one in the first place.
Here are some key benefits of forming a nonprofit organization.
Federal Income Tax Exemption
One of the biggest benefits of forming a nonprofit organization is that you get federal tax exemption. This allows you to allocate more funds toward achieving your organization’s goals instead of covering tax liabilities.
Organizations under the Internal Revenue Code 501(c)(3) are exempted from paying corporate income taxes. Some organizations may even get state-level sales and property tax exemptions, depending on the state of business formation.
Eligibility for Grants
Another reason why you should form a nonprofit organization if you are eligible is that you can get public or private grants for various types of work you do. You can use this fund to expand current initiatives, hire staff, or launch new initiatives.
Grants allow nonprofits to scale their efforts without relying solely on donations or income-generating activities. This steady funding stream supports long-term sustainability, helping nonprofits serve their mission more effectively.
Separate Legal Entity
A nonprofit corporation or LLC exists as its own legal entity, separate from its owners. It can enter into contracts on its own, sue or be sued, is responsible for its own obligations, and has a clear mission, separate from the owners’ interests.
As a legal entity meant for the public good, a nonprofit is considered credible and trustworthy. This makes it easier to get grants and donations for various initiatives. This also provides a level of personal liability protection for owners.
Limited Personal Liability
Like any other LLC or corporation, a nonprofit organization also offers limited liability protection to owners. This means that the owners’ or members’ personal assets can’t be seized to pay for the nonprofit organization’s debts and financial liabilities.
This makes it easier to attract qualified individuals to serve on the board as their personal assets will be protected if the business incurs debts or liabilities. It helps board members to focus on guiding the organization without worrying about personal risks.
Perpetual Existence
A nonprofit can continue to exist even if its founders or board members leave. Unlike a for-profit business that may close when the owner steps down, a nonprofit can serve its mission indefinitely. This allows it to create long-term impact and evolve.
Perpetual existence also makes it easier to plan for the future, as leadership transitions don’t disrupt operations. Many nonprofits last for decades because their structure ensures continuity, allowing them to help more people over time.
Ability to Attract Volunteers and Supporters
People are more likely to volunteer their time and expertise for a recognized nonprofit rather than an informal organization. A formal nonprofit status helps you recruit passionate individuals who believe in your mission and want to contribute meaningfully.
Nonprofits also qualify for volunteer grant programs, where companies donate money based on their employees' volunteer hours. This means you not only gain skilled volunteers but also unlock additional funding through corporate partnerships.
Eligibility Criteria to Apply for the Nonprofit Status
Under Section 501(c)(3) of the Internal Revenue Code, an organization can be tax-exempt only if it is organized and operated exclusively for the exempt purposes as defined in that section of the code.
To be eligible for nonprofit status, an organization serves the following purposes or goals.
Religious
Supporting religious activities or spiritual development of people in various communities. Examples: Churches, mosques, synagogues, or spiritual organizations.
Educational
Spreading the importance of education and providing everyone access to education. Examples are schools, literacy programs, or organizations offering scholarships.
Scientific
Conducting or funding research for the advancement of science and technology in various areas. Examples are cancer research foundations or climate change organizations.
Literary/Artistic
Promoting arts, culture, and creativity, making them accessible to the general public. Some examples are community theaters, museums, or poetry foundations.
Public Safety
Protecting communities or individuals from harm, emergencies, or natural disasters. Examples include volunteer fire departments or emergency preparedness groups.
Advocacy/Social Justice
Addressing social inequities and pushing for change through advocacy and community empowerment. Civil rights organizations or LGBTQ+ advocacy groups fall into this group.
Environmental
Protecting and preserving natural resources, and wildlife, or promoting sustainable practices. Example: wildlife conservation groups or clean water initiatives.
If you want to pursue any of these goals via your organization, you can apply for a nonprofit status. Once you do, don’t forget to get a nonprofit tax ID to get the tax benefits and easily file taxes.
Get a Nonprofit Tax ID OnlineWhy Do You Need a Nonprofit Tax ID?
There are many use cases for a nonprofit tax ID, from helping you open a business bank account to getting donations and funds.
Let’s discuss some of the key ones.
Opening a Bank Account
If you want to open a bank account for your Church, educational institution, or whatever type of nonprofit you run, you will need a nonprofit tax ID or EIN. Banks require an EIN to verify that the firm is legitimate and separate from the founders.
Having a dedicated bank account helps keep the nonprofit’s funds separate from personal finances, ensuring transparency. This makes applying for a nonprofit tax ID even more important, especially if you want to avoid public scrutiny.
Applying for the Tax-Exempt Status
You will need a nonprofit tax ID to apply for federal tax-exempt status with the Internal Revenue Service (IRS) under 501(c). The nonprofit tax ID is used to identify your organization during the application process and throughout its operations.
Once approved, the nonprofit tax ID allows the nonprofit to avoid paying federal income tax and, in many cases, state and local taxes. Without a nonprofit tax ID, you can’t get the special tax-exempt entity status and avoid paying business taxes.
Hiring Permanent Employees
If you ever plan to hire employees for your organization, you will need a nonprofit tax ID. The nonprofit tax ID is used to report wages, withhold income taxes, and pay Social Security and Medicare contributions on behalf of employees.
This will ensure that your nonprofit organization follows employment laws and provides employees with required forms, such as W-2s, for their tax filings. Overall, having a nonprofit tax ID is necessary for filing payroll taxes for your employees.
Paying Independent Contractors
Even if you don’t plan to hire full-time or part-time employees for the organization, you might need a nonprofit tax ID if you hire independent contractors or freelance business owners. A nonprofit tax ID will be required to pay these contractors.
If you pay contractors more than $600 in a year, your company has to issue them a 1099 form using its nonprofit tax ID. It provides independent contractors with the necessary documents for their own personal income tax returns.
Receiving Donations and Grants
If you plan on applying for grants or receiving donations, you will need a nonprofit tax ID to prove that you run a legitimate organization. Donors use your nonprofit tax ID as proof of your organization’s identity and eligibility for grants or donations.
A nonprofit tax ID is also used to provide official donation receipts that donors need for tax-deductible charitable contributions. Without a nonprofit tax ID, your organization might miss out on significant funding opportunities from donors.
Comply with Federal and State Reporting Requirements
Nonprofits must use their tax ID when filing required forms, such as annual tax returns (e.g., Form 990 in the U.S.) or state compliance reports. You will need to fill out and submit these forms to stay in good standing with the state authorities.
A nonprofit tax ID allows the state and regulatory authorities to track your organization's financial activities and tax filings. As such, it is necessary to ensure complete transparency and meet the regulatory requirements.
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Apply for EIN Online Without HassleHow to Get a Nonprofit Tax ID: A Step-by-Step Guide
1. Choose a Name
- One of the first steps when you form any type of business is choosing a name.
- Your company’s legal name will be required when you form a nonprofit corporation.
- Choose a business name that represents the core purpose of your nonprofit organization.
- For example, if it’s a charitable organization, your legal name should reflect that.
- You may choose to apply for a DBA if you want better public recognition.
2. Define Your Mission
- Your nonprofit organization must have a clear goal that serves the public interest.
- Define the core purpose, mission, and goals of your nonprofit organization.
- These will be limited to charitable, educational, and other goals as defined by the IRS.
- Based on your mission, you also need to list some key goals of your organization.
- Once you form a nonprofit company, you will have to stick to these goals.
3. Form a Corporation
- You can’t directly form a nonprofit corporation as it’s not an entity but a tax status.
- You will need to first form a C-corp and then apply for the 501(c) tax-exempt status.
- This requires filing the articles of incorporation with the state authorities.
- If you need help, hire one of the best incorporation services for the process.
- Make sure you provide all legal documents and fill out the application correctly.
4. Appoint a Board of Directors
- Once you form a C-corporation, you’ll need to appoint directors, managers, and officers.
- These are people who will be responsible for managing your company’s operations.
- You’ll also need to create a board of directors with some or all of your company’s directors.
- This is especially important if you want to form a nonprofit organization.
- A nonprofit can’t be governed by its founders and has to be ruled by a board of directors.
5. Apply for a Nonprofit Tax ID
- You can do this step soon after you have formed a corporation by registering it with the state.
- You need to apply for a nonprofit tax ID by filling out a federal application with the IRS.
- This is another long and complex form, so you may end up making mistakes if you do it yourself.
- We recommend hiring EIN-Tax-ID-Form.com to help you with this.
- You just need to provide the information and they’ll fill out the EIN application for you.
6. Get the Tax-Exempt Status
- Once you’ve formed a corporation, you can check if it’s eligible to be a nonprofit.
- Apply for nonprofit status by filing a 1023 Application with the IRS to get the 501(c) status.
- If you want to form a church or charitable organization, you’ll need the 501(c)(3) status.
- The form is extremely long and complex, so it will take a lot of time to fill it out.
- You may hire business formation or legal services to guide you through the process.
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Get a Nonprofit Tax ID OnlineWhy Choose EIN-Tax-ID-Form.com to Get a Nonprofit Tax ID
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Apply for an EIN OnlineFAQ
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1. Is an EIN the same as a tax ID for a nonprofit?
Yes, a nonprofit tax ID and federal employer identification number (EIN) are different names for the same thing. It is like a social security number for an organization, which the government and regulatory authorities use to track its financial and tax activities.
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2. How do I get a nonprofit tax ID number?
To get a nonprofit tax ID, you first need to form a corporation, get the nonprofit tax-exempt status, and then apply for an EIN via the Internal Revenue Service (IRS).
We recommend using a professional service like that provided by EIN-Tax-ID-Form.com to ensure a hassle-free experience. They will take care of all the complex paperwork, while you only need to fill out a short online form.
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3. What tax code is a non-profit?
The IRS tax code for nonprofit organizations is 501(C).
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4. What is the difference between a 501(c) and a 501(c)(3)?
501(c) is a general category of nonprofit organizations and all such organizations fall under this broad category. However, some specific types of nonprofit organizations have the subcategory 501(c)(3). These include charitable organizations that can allow their donors to get tax deductions on their donations.
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5. Do I need a nonprofit tax ID for my organization?
Yes, a nonprofit tax ID is required for various reasons, from opening a bank account to getting grants and donations for your tax-exempt organization. So, apply for a nonprofit tax ID as soon as you form your nonprofit corporation.
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