How to close down an EIN for a tax exempt organization

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Closing an EIN for a tax exempt organization is described at the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/canceling-an-ein-closing-your-account 

Information for Exempt Organizations

If you applied for an EIN for an exempt organization that:

(1) never applied for formal exemption,

(2) is not covered in a group ruling, or

(3) never filed an information return (Form 990, 990-EZ or 990-N),

send a letter requesting the closing of your account to:

Internal Revenue Service
Attn: EO Entity
Mail Stop 6273
Ogden, UT 84201

or you may fax it to (801) 620-7116.

State the reason you wish to close your account. If you have a copy of the EIN Assignment Notice that was issued when your EIN was assigned, you should include that when you write. Otherwise, be sure to include the complete legal name of the entity, the EIN, and the mailing address.

 

Read the 3 criteria listed above carefully. If your organization fits all of the criteria, then write a letter to the IRS and give the reason you are closing your EIN. Usually it is because the organization dissolved or ceased its operations or activities.

If you fail one of the criteria, the IRS has different instructions. https://www.irs.gov/charities-non-profits/termination-of-an-exempt-organization.

You will have to file one more 990-N for the old organization and check “Yes” to the question “Has your organization terminated or gone out of business?” If you typically file the Form 990 or 990-EZ, than check the Terminated box in the header area on page 1.

Additionally, you will need to file a Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets with your Form 990 or 990-EZ. If you file a 990-N, there is no Schedule N to file.

 

Carol Topp, CPA

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Can a homeschool group just get together without having to report to the IRS?

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Can a homeschool group just get together without having to report to the IRS?

Dorothy

 

Ddorothy,

Yes, a group of homeschool families can just gather together, but the group will be limited in their size and to dealing in cash only.

Very small homeschool groups are more like a play group or group of friends pooling their money to pay group expenses, like a field trip.

I compare it to a group of friends all going out to dinner. They each pitch in to pay the bill. These tiny groups do not file reports with the IRS. Very tiny homeschool groups can operate like this.

In this case, a group may not need an EIN or to open a checking account for the group, but they would be limited in size and limited to cash only. It’s usually when a group needs a checking account that they have dealings with the IRS, because they need an EIN to open a checking account.

I hope that helps,

Carol Topp, CPA

Best of: Checking accounts for homeschool organizations

checkbook07Here’s a collections of my best blog posts on checking accounts for homeschool organizations.

Start with this article about getting a identification number from the IRS before you open a checking account:

Getting an EIN from the IRS

Then read through these blog posts:

Checking accounts and EINs for homeschool groups
Will getting an EIN put us on the IRS radar?
EIN before or after incorporation?
Fraud in a homeschool group
Banker wants IRS letter to open a checking account

Cover Money Mgmt HS OrgYou’ll find more information on managing money in a homeschool organization in my book, Money Management in a Homeschool Organization: A Guide for Treasurers.

Carol Topp, CPA

A new nonprofit corporation. Do they need to reapply for 501c3 status?

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Hi Carol,

I have been listening to your podcasts. Our group is already a 501c3 registered charity with the IRS. Unfortunately, we registered with our state as an unincorporated association. We would like the limited liability of a non-profit corporation and have the funds to apply, but after listening to your podcast I have a few questions:

1) Do we need to set up a new bank account? Or just change the set up on our current accounts? We have a Paypal linked, Amazon Smile account, Cash for Our Cause through our bank.

2) Will this affect anything with our IRS account? We won’t have to re-apply for 501c3 status will we?

Thanks for your help!
Misty in Texas

 

Misty,

I hope some of my podcasts were helpful! Thanks for listening.

Bad news: You need a new EIN and must reapply for tax exempt status

If your organization now wishes to become a nonprofit corporation (and I highly recommend it), you will have to get a new Employer Identification Number (EIN) and re-apply for 501(c)(3) tax exempt status in the name of your new corporation with its new EIN.

When you create a corporation, it is a new legal entity. So the IRS wants you to get a new EIN and makes you go through the 501(c)(3) application process again. Bummer.

Here’s a recent blog post on that issue: http://homeschoolcpa.com/incorporated-in-your-state-time-for-a-new-ein/

Good News: It’s easier to apply for 501(c)(3) status

Fortunately, the IRS does have a new short application for 501(c)(3) status, Form 1023-EZ. I have assisted about 25 nonprofit organizations get tax exempt status the new Form 1023-EZ. Some have received their tax exempt status in 10 days. That’s much faster than the 3 to 13 months in the past! Contact me if you’d like my help in applying (or reapplying) for tax exempt status.

The bank should make you open a new bank account with the new EIN. Paypal, Amazon Smile, etc. probably don’t care about your new corporate status, but you will need to re-connect them to your new bank account.

Carol Topp, CPA

Incorporated in your state? Time for a new EIN!

IRS

I just updated my article on “Getting an EIN from the IRS”  (on my Articles page) because my original article neglected to mention that your organization needs a new EIN after you incorporate as a nonprofit corporation in your state.

Here’s what I added:

If your group became a nonprofit corporation in your state, then you need a new EIN from the IRS in the name of the new corporation. A corporation is a new legal entity and you need a new EIN to match it. Use the same name as you used when incorporating. Look on the certificate you received from your state for your official legal name.

Read the full, updated article here: Getting and EIN from the IRS 

 

Cover Money Mgmt HS OrgIf you have questions about applying for an EIN or the Form SS-4, read the chapter on “Checking Accounts Done Right” in my book Money Management in a Homeschool Organization

 

If you have questions about setting up or running your homeschool organization, visit HomeschoolCPA.com or consider a private phone consultation with me.

 

 

Create a board binder of important papers for your homeschool organization

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I was helping a homeschool leader apply for 501(c)(3) tax exempt status for her homeschool co-op when she mentioned that she had created a binder of important papers. That’s an excellent idea!

I suggested she create three binders and share them with her board members, especially:

  • The secretary who is the keeper of the paperwork for the organization
  • The treasurer who is responsible for the annual reporting to the IRS and their state.
  • The board president whose job it is to make sure everyone else is doing their jobs.

All the board members are responsible for management of the nonprofit and compliance with nonprofit laws. Having a binder of important papers that leaders can to pass down future leaders will make sure the organization is managed well and in compliance with all its reporting obligations.

Here’s what to put in your homeschool organization binders:

  • Employer Identification Number (EIN) letter from the IRS.
  • Articles of Incorporation from your state. This should be the official certified copy with a date stamp proving that your Articles of Incorporation were filed with your Secretary of State.
  • Bylaws. Date them so you have the most recent copy.
  • IRS 501(c)(3) determination letter.
  • IRS Annual Information Returns, the Form 990N, 990-EZ or full 990s
  • IRS Form 8822-B to change the contact name associated with your EIN or to change your address
  • Any state annual reports you file. (If you don’t know what reports you need to file with the state, contact me and I can help.)
  • Helpful articles from HomeschoolCPA.com
  • Books by Carol Topp, CPA especially Money Management in a Homeschool Organization
  • HomeschoolCPA.com website.

 

I highly recommend that you laminate or protect in plastic sheets these important documents.

Pass these binders down to the leaders who succeed you!

Carol Topp, CPA

How to get added to the IRS database and file the Form 990N

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Carol,
We’re a newly organized homeschool support group. Is there anything we need to do with the IRS to establish ourselves as a 501c7 social club, or do we just need to get our EIN and start filing the 990N?

Thanks again! I really appreciate your help. 🙂

Melissa

 

After you get your EIN (Employer Identification Number), you won’t be able to file the 990-Ns just yet.

Self declare tax exempt status

Since you have not applied on paper for 501(c)(7) status  (you can “self declare” 501c7 status and don’t have to file the paperwork), you are not in the IRS database (yet), so you need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their database so you can begin filing the Form 990Ns.

It typically takes 6 weeks after you call to be added to the IRS database.

Tips when calling the IRS

Say something like this,

“We’re a brand new 501c7 Social Club and my CPA said I needed to get added to the IRS exempt organization database, so we could start filing the 990-Ns.”


If you’re a homeschool educational program (co-op, etc)

Or if your homeschool group has an educational purpose, you’re most likely a 501c3 tax exempt organization. Read about the difference between 501c7 Social clubs and 501c3 organizations. In that case, you’ll say:

“We’re a brand new 501c3 educational organization and my CPA said I needed to get added to the IRS exempt organization database so we could start filing our 990-Ns.”

**Note that only 501c3 organizations with less than $5,000 annual gross revenues can “self-declare” their tax exempt status. 501c3s with more than $5,000/year in revenues must apply for 501c3 status using Form 1023 or the new, shorter Form 1023-EZ.


They will ask for your EIN and organization’s name, address, and probably a contact name.

They may also ask what date your fiscal year ends. Many support groups operate on a calendar year, but some operate on a school year with a year end of June 30 or July 31. Look at the form you filed when you applied for your EIN to see what you chose as your fiscal year end.

They may ask if you have “organizing documents.” They mean bylaws or Articles of Association (or Articles of Incorporation). So tell them if you have bylaws or Articles of Association/Articles of Incorporation. Samples can be found here.

Finally, if they tell you you must file a Form 1024 to obtain 501(c)(7) tax exempt status, tell them (with confidence) your CPA informed you that you can “self declare” tax exempt status as a social club and do not have to file the Form 1024.

Call the IRS early in the morning. They open at 8 am ET and you can usually get through pretty quickly of you call then, Record the date you call, the IRS employee name and their identification number.

Don’t forget to the the 990-N every year!

Be sure you go online to file the Form 990-N anytime after your fiscal year ends and before its due date which is 4 1/2 months after the end of your fiscal year. So if you operate on a calendar year, the 990-N is due May 15.

Have more questions about your homeschool organization’s tax exempt status? My book, The IRS and Your Homeschool Organization would be a big help.

Carol Topp, CPA

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Can we get an EIN without giving a name and SSN?

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Carol,
First, I would like to thank you for writing the very informative book “The IRS and Your Homeschool Organization”.

I am president of a small homeschool organization (15 families, 50 children) in North Carolina. I respect the need for an identity with government, so (after reading your book) I have decided to pursue incorporation in North Carolina.

The question I have is regarding having a tax ID number (Megan is referring to an Employer Identification Number, EIN) for the group in order to open a bank account, etc. Do we apply for a tax ID after we are incorporated?

Also, all methods of applying for a tax ID that I have seen involve applying using my Social Security Number (SSN). I have to admit that using my personal information for the group makes me uncomfortable. Is there any way to get a tax ID for the group without using an individual’s SSN?

Thank you in advance for your time and attention.

Megan D in NC

Megan,
Thank you for your kind words. I’m glad the book was helpful!

You apply for your Employer Identification Number (EIN) after you are incorporated in NC.

I completely understand your reluctance to put your Social Security Number  on any application. We need to be careful to protect our SSNs in this day of identity theft.

But the IRS requires an EIN to be tied to a human being.

This came about because the IRS found that businesses were applying for EINs with a temporary name listed. Sometimes filings services such as attorneys or Legal Zoom were putting their names on the EIN, but were not the real person(s) responsible. I’ve also read that terrorist organizations were applying for EINs with fake names.

So, the IRS needed to tie the true responsible person to the nonprofit organization. They now require a responsible party name and Social Security Number on the EIN application to stop any misrepresentation or deception.

Carol Topp, CPA

P.S. You can change the responsible party name and SSN on the EIN at a later date if you are no longer involved with the nonprofit. File IRS Form 8822-B to change the responsible party.

Can our homeschool nonprofit get a new EIN to start filing the Form 990-N?

TaxExemptRevoked

Carol,

What would happen if I were to call the IRS, have them enable my Employer Identification Number (EIN) to file a 990-N (we’re under $5k/year in gross receipts), and then file a 990-N at the end of the year? Perhaps they would flag my e-postcard since we have never filed one, but the EIN has existed for many years. Can my organization apply for a new EIN?

Will

 

Will,

Since your organization has existed for many years, but has not filed any annual information returns (990/990EZ, 990-N), the IRS will look back and revoke your tax exempt status. You will need to apply for tax exempt status.

Your current organization could dissolve and some of your leaders could form a new organization with a new name and new EIN. But the former head of the IRS Exempt Organizations, Lois Lerner, has said,

“I don’t know if it’s purposeful, but I do know that it’s important for people to understand getting a new EIN is not the answer. It’s like getting a Social Security number, they’re very easy to get. You can get one, we’ll enter it in our system but when we actually start looking and you’ve got two EINs, and one of them is revoked, unless you came back in, the other is not going to be legitimate in terms of your status. So keep that in mind.”

Source: http://waysandmeans.house.gov/uploadedfiles/boustany_johnson_ssns_72313.pdf page 9

So, getting a new EIN does not satisfy the IRS. You should probably look into getting your tax exempt status reinstated. I can help with that. More information here.

Carol Topp, CPA

 

Will getting an EIN put us on the IRS radar?

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Usually the first contact a homeschool organization has with the IRS is getting an Employer Identification Number (EIN). Most banks now request an EIN when a group opens a checking account. One group in Virginia is doing things right by getting a checking account for their homeschool co-op instead of using a personal account, but they wonder if this will mean more contact with the IRS.

Hi Carol,
I am new to an existing homeschool co-op in VA. This co-op is more then 12-15 years old, we do not accept donations or need to, so far we have been handling the money through someone’s personal bank account, we receive fees from students and then pay teachers and reimburse them for materials, generally we break even each year (or can if we need to).

The bottom line is that we want to be able to have a business checking account.

Can we get an EIN in order to open a checking account in our co-op name without incorporating and without having a state or federal annual filing requirement? I seem to remember that once you get an EIN (that I think is required for a business bank account), you are on the radar screen with the IRS and will need to file some sort of return.
Thanks so much,
Nancy in VA

Nancy,

Yes, you need an EIN for banking purposes. It used to be that getting an EIN was the first and last time a small homeschool organizations had to deal with the IRS. But not anymore!

Since 2007, the IRS has required tax exempt organizations (like your homeschool co-op) to file an annual information return, Form 990/990EZ or 990N. Fortunately, for small organizations (under $50,000 annual gross revenues), the Form 990N, is a short online form that asks only 6 questions. Read more here: Form 990N FAQ

If you are paying teachers, then you have some reporting to the IRS and your state government. You will have to pay payroll tax (Social Security and Medicare) and file a W-2 if they are employees or file a 1099MISC if they are independent contractors. You should read this blog entry: Paying co-op teachers is a sticky issue

3Homeschoolbooks

Need help understanding tax exempt status or money management in your homeschool group?

Carol Topp’s books are written specifically for the homeschool leader.

 

Carol Topp, CPA