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Why Do Nonprofit Organizations Need A Tax ID?


Every business needs an employer identification number (EIN), from a South Carolina LLC to a corporation in Louisiana. Louisiana  Tax ID number types are the same for different types of business entities.  What surprises some people is that the definition of “business” is wider for the IRS than it is in everyday speech.  Some types of entities that most people do not think of as businesses need an EIN.

Why Does a Nonprofit Organization Need an EIN?

The basic principle behind EINs is that any entity that has income and expenses must file a tax return.  Therefore, it needs a taxpayer ID number.  The idea is similar to the fact that every person, regardless of whether he or she is currently working, has a social security number.

Another way to think about it is to consider that the “E” in EIN stands for “employer.”  Is it possible for someone to list a nonprofit organization as his or her employer?  The answer is yes.  Many nonprofit organizations have employees; some have just a few, and some have thousands.  Therefore, it makes perfect sense for a nonprofit organization to have an EIN.

Other Non-Commercial Entities That Need an EIN

Nonprofit organizations are not the only entities, besides ordinary businesses, that need an EIN.  Religious organizations such as churches also need an EIN.  (If they didn’t have EINs, how could pastors file their tax returns?)  Even trusts and estates, which have trustees and executors, but not employees, need an EIN.  Households that employ babysitters should also apply for an EIN.

EINs are not just for businesses.  They are not even just for operations that pay employees.  Any type of organization that has income and expenses needs to get an EIN so it can file a tax return.

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