A nonprofit tax ID number is required for charitable organizations to operate without having to pay taxes on their donated funds. Tax exempt status is the only way for these philanthropic institutions to operate effectively. As a philanthropist looking to start a public charity, you need to know how to receive a nonprofit tax ID number for your organization. However, the process is more complicated than simply filling out a form with the IRS. Keep reading to learn how to obtain a nonprofit tax ID number for your public charity.
Create An Organization
The first step in obtaining a nonprofit tax ID number is to create a nonprofit organization. While this may appear obvious, many organization runners who apply for nonprofit status do not know that their operation model is unable to obtain tax exemption. It is important that you ensure your choice of organization can qualify. The IRS has a complete list of all organizations that can apply for tax exempt status. Before creating an organization, read through the list to ensure the company you are starting can qualify. In order to obtain a nonprofit tax ID number, start by creating an organization with the chance to qualify for exemption. Only then can you answer your question of “what is my tax ID number?” and operate legally.
Ensure You Qualify
After you start a nonprofit organization, you still have to ensure your institution qualifies for a tax ID number. There are over 30 types of nonprofit organizations as designated by the U.S. Congress. As a public charity, you have to comply with Section 501(c)(3) of the tax code. However, there are still subcategories of public charities you have to research. Each type of organization has its own burden of proof when applying for tax exempt status. Once you have chosen the type of nonprofit you wish to start, research the unique qualifications required to get approved. The one constant requirement across the board is that no shareholders in your company can be paid by net profits. To obtain a tax ID number for your public charity, you have to ensure that your organization meets the qualifications set by Congress.
Hire A Tax Attorney
Before you apply for your tax ID number, hire an attorney who specializes in tax law and nonprofit organizations. The application process can be tricky, especially for larger organizations. For this reason, it is in your best interest to hire an attorney to help navigate you. There are many steps to the application with even more rules for you to follow. Find a lawyer who works exclusively in this space to ensure that the application is filled out and filed correctly. While hiring an attorney will cost you, it is the best way to guarantee you properly complete your application. When you are ready to apply for your nonprofit tax ID number, hire an attorney to assist you with the application.
Apply To The IRS
Furthermore, once you have secured a lawyer to help with the application, it is time to apply to the IRS for your tax ID number. Fill out the application online, via email, or through fax. The IRS requires proof that you are running a legally formed organization as well as assurance that you meet the nonprofit prerequisites set by Congress. The wait for tax exempt approval is notoriously long. In order to speed up the process, ensure that you have paid the proper fees and are applying with the correct forms. The IRS states that the most typical cause for delay is incomplete, inaccurate, or irrelevant information. Carefully fill out the application to the best of your ability in order to obtain your nonprofit tax ID number.
Comply With State Laws
Finally, even though your public charity has obtained a nonprofit tax ID number from the IRS, you still have to comply with state laws before you start soliciting. IRS nonprofit exemption only applies to federal taxes. That means that there are state regulations you must comply with. For 40 states, this entails you complete the Charitable Solicitations Registration. Typically, this is done through the Attorney General’s office. There may be other requirements to meet depending on your state. Before you begin soliciting and collecting donations, ensure that your tax exempt organization complies with state and local laws.
For public charities to be effective, they need to receive their tax ID number for tax exemption. More so, if you want to receive online donations for nonprofits without worry, you need to obtain a tax ID number. To get approval, start by creating a not-for-profit organization. Then ensure that the organization qualifies for tax exempt status by researching the requirements set by Congress. Hire an attorney to assist with the application and then apply to the IRS for your nonprofit tax ID number. After you have received approval from the IRS, ensure you are complying with state laws before you begin collecting donations. Follow this advice in order to obtain a nonprofit tax ID number for your public charity.