What is an Employer Identification Number?
Your organization’s EIN is the unique identifier that the IRS and other government agencies will use to identify your organization. It’s a simple nine-digit number with the format XX-XXXXXXX. Your EIN is unique to your organization, so there aren’t any other nonprofits or businesses out there with the same number.
You’ll need to get an EIN for your organization during the nonprofit registration process, together with your tax filings and any correspondence with the IRS. You’ll also need your EIN when signing up for bank accounts or credit for your nonprofit organization.
Who needs an employer identification number?
EINs are used by a wide range of different organizations, including both for-profit businesses and nonprofits, such as sports clubs and leagues, fraternal societies, social clubs, and more. There are a few simple criteria that determine whether or not your organization needs an EIN.
First, any business or organization that has employees must have an EIN. Any organization that operates as a corporation or partnership also needs an EIN, even if they don’t have employees. There are also a variety of other cases, such as entities like trusts and estates.
Most importantly for nonprofit club administrators and members, nonprofit organizations require an EIN. This category is specially listed by the IRS, and you will need an EIN when you register for tax-exempt status.
The level of tax-exempt status that nonprofit organizations can vary depending on their category. Social clubs, sports teams, and other membership clubs enjoy tax exemption on dues but not necessarily on all income. Even a registered charity in the 501(c)(3) category needs an EIN, even though it won’t have any payable taxes at all.
The cost of registering for an EIN
During the nonprofit registration process, one of the most common questions is how to apply for the EIN number. This step can seem intimidating, especially if you’re just one person administrating a small nonprofit organization. However, the EIN application process is relatively straightforward and has been designed with small businesses and organizations in mind.
The first thing you should know is that the EIN application is free. You won’t face any direct registration costs, and there’s no need for any legal or accounting support. While other parts of registering your business, such as incorporating, may carry such expenses, your EIN application doesn’t cost anything.
Before applying for your EIN
It’s essential to remember that the EIN isn’t the first step in registering your organization. First, you’ll have to establish the legal structure of your nonprofit. In almost all cases, that’s going to be a corporation.
Incorporating your organization involves defining the leadership structure and bylaws that you’ll operate under. You’ll then have to file your completed paperwork, called the articles of incorporation, with the appropriate state organization. Requirements vary from state to state, and there will likely be a nominal filing fee.
Methods for submitting your EIN application
When you apply for an EIN number, you’ll do so directly with the IRS. They provide a variety of different methods that allow any organization to submit the proper forms for their application.
In most cases, the best route forward is through the IRS online EIN application. This simple and free-to-use online application process guides you through the process. However, you should be sure to have all relevant information on hand before you start. Incomplete applications can’t be saved, and there’s a 15-minute time-out for inactivity. If you don’t plan carefully, you could have to start the application over.
First, you’ll be asked about the legal structure of your organization. Most of these apply to businesses and other entities, so you’ll want to view additional types to find nonprofit organizations. This provides a list of various nonprofit organizations, including churches, social clubs, sports teams, and more. You can choose the appropriate type or “other” if you don’t fall into one of those categories.
You’ll then have to choose your reason for applying for the EIN. You might apply for it when hiring employees, purchasing a business, or changing the organization type. If you’re registering a nonprofit organization, then you likely want to select that you’re starting a new business (even though it says business instead of nonprofit).
From there, you’ll have to provide some more specific information about yourself and other nonprofit organization leadership. The name and address of the organization are also important information that you’ll need.
The process is quick, and you can always reach out to the IRS via phone for support during the application process. In most cases, you’ll receive an EIN immediately upon completing the application process.
Applying by Fax or Mail
The online application process essentially guides you through the completion of Form SS-4, Application for Employer Identification Number. Of course, you can always print out the form and complete it manually as well. This might be a bit less intuitive than the online process, but you’re still providing the same basic information.
Once you’ve completed the form, you can fax or mail it to IRS:
Cincinnati, Ohio 45999
The IRS has several fax numbers depending on the location of your organization:
For organizations inside one of the 50 states or D.C.: 855 641 6935
For organizations inside U.S. territories: 855 215 1627
For organizations outside of the U.S.: 304 707 9471
If you apply by mail, the IRS will mail you the response to your application at the address you provide for your organization. The general processing timeline for applications by mail is four weeks. Applications by fax can provide a fax number to receive a response within four business days.
Filing for tax-exempt status with your EIN
Now that you’ve received your EIN from the IRS, you’re ready to file for your tax-exempt status. This is the last step in legitimizing your nonprofit organization and will ensure that you have the appropriate tax-exempt status for your 501(c) classification.
There are several different forms that your organization may need to file, depending on its specific classification. A strictly charitable organization filing for 501(c)(3) classification would file Form 1023. Most other types of nonprofit organizations would use Form 1024 for their 501(c) classification.
Establishing banking for your organization
Your EIN is an integral part of registering your nonprofit organization and achieving tax-exempt status. However, it’s also just as important when it comes to setting up a bank account for your nonprofit.
When you go to open an account for your organization, you’ll need your EIN to do so. The same goes for any credit that your organization might need, even if it’s just a credit card for operational use. It’s a lot like using your SSN when opening a personal bank account or credit.
Nonprofit membership club banking with Crowded
Choosing the right bank for your nonprofit organization is a crucial decision. It is essential to select a bank that understands the unique requirements of nonprofit organizations, offers user-friendly digital banking options, and provides affordable fees that fit your budget.
Crowded is a solution specifically designed for nonprofit groups that simplifies administration and automates many of the basic tasks required to manage your organization’s finances. Furthermore, Crowded provides free banking accounts with affordable banking fees.
Once you have your EIN, you can sign up for a free Crowded account that includes digital banking and tools for dues collection, expense management, budgeting, reporting, and much more. Our focus is on nonprofit membership clubs, and we provide unique benefits while minimizing your overall banking costs.
Apply for your EIN and run your club the right way today
If you have already established a thriving membership club, you can easily obtain your EIN by completing the online registration process today. You can easily register online and then proceed to set up a worry-free and affordable nonprofit banking service with Crowded.