What Happens If We Use the Wrong EIN?

For churches and other groups, the Employer Identification Number (EIN) is particularly significant. The IRS only uses this tax ID for the group. But what if your church has the wrong EIN? Using the wrong EIN can cause a lot of trouble, such as having trouble filing your taxes or putting your church's tax-exempt status in danger. This can arise due to errors made by clerks, poor communication, or a lack of understanding.

In this full lesson, we'll talk about what happens if you use the wrong EIN, the risks involved, how to detect and fix the problem, and how to avoid making the same mistake again. If you know this, you can protect your church's legal status and make sure that everything goes well and is done by the law.

What is an EIN, and why is it important?

The IRS assigns churches a nine-digit number called an EIN. This number is only for federal tax purposes. It acts like a Social Security number for corporations. Churches use their EIN for:

• Sending in tax returns and reports of information
• Opening bank accounts
• Asking to not have to pay taxes
• Paying employees and paying their taxes
• Following the law and the regulations for money

An incorrect EIN can screw up any or all of these functions.

Why Churches Use the Wrong EIN So Often

• Using the EIN of a church that has since merged or changed its name by mistake
• Confusing the EIN with a Social Security Number or another ID for yourself
• Things to avoid while talking to the IRS or a bank
• Using an EIN for a ministry or group that is not the main church but is affiliated with it
• Not knowing that a church is made up of numerous parts

What might happen if you use the wrong EIN?

1. Errors on tax forms

If you give the IRS the erroneous EIN, they may take longer to look at your application or turn it down. This implies that if you file late or incorrectly, you will have to pay more money in penalties and interest. Donors may also have problems securing tax breaks.

1. Not being able to avoid paying taxes

Using the wrong EIN more than once or not filing under the right one could raise red flags and put your church's 501(c)(3) status in danger.

1. Issues with banks and cash

If you put the wrong EIN on your bank accounts or financial records, your accounts could be frozen, you might not be able to deposit gifts, or payroll could be harder to handle.

1. Risks of compliance and audits

If you use the wrong EIN, the IRS or your state could audit you, which would imply extra work and more attention.

How to Know If Your EIN Is Wrong

• Letters or notices from the IRS that have the wrong EIN
• Issues with confirming your account at the bank or payroll service
• Tax returns that were denied or took a long time to be processed
• Donors want to know about tax receipts or if they may claim a deduction
• There is a lot of confusion inside the organization about how things are set up and what forms are needed

How to Fix Mistakes with Your EIN

1. Make sure your church has the correct EIN.

To be sure your EIN is correct, look at the official IRS EIN Confirmation Letter (CP 575) or the IRS's online records.

1. Let the IRS and other groups know.

If you sent in something with the wrong EIN, tell the IRS right away and send in new returns or papers.

1. Make the bank and payroll records correct.

Check that all banks, payroll firms, and other financial institutions have the correct EIN.

1. Talk to donors and other important people.

Tell donors and other people who have a stake in the change so that there is no confusion with donations.

1. Talk to tax and legal specialists.

Get guidance from an expert to make sure that everything you do to fix things is legal and well-documented.

How to Avoid Making EIN Mistakes

• Keep all of your church's legal documents, such as the EIN certification, in one spot.
• Show administrative staff how to utilize EIN properly and explain why it matters.
• Regularly check your tax and financial records to make sure they are right.
• If your firm has a lot of moving parts, use professionals to handle the accounting and legal tasks.

What Church Law and Strategy Do

Regan is in charge of Church Law and Strategy, which helps churches with EIN issues, from repairing mistakes to making sure they obey tax laws and IRS standards. Our subscription plans, like the FOUNDATION PLUS PLAN, include legal audits and ongoing support to help maintain your church's legal position safe.

What to Do If You Use the Wrong EIN

• Look for your church's official EIN.
• Make sure that all of the papers and filings are correct for the EIN.
• Right now, fix your IRS, bank, and payroll records.
• Make sure that donors and other essential persons know about changes in a straightforward way.
• Set guidelines to keep EIN mistakes from repeating again.
• Get guidance from tax and legal professionals.

The End

Using the improper EIN for your church could lead to a number of complications, such as tax issues and money troubles. The best strategy to protect your ministry's reputation and compliance and keep damage to a minimum is to find problems early and rectify them fast.

Church Law and Strategy may help your church with EIN management and other legal matters so that your ministry can run smoothly and with confidence.

Links inside

• Learn more about church legal services
• Check our legal materials for forming a church
• Find information about church compliance and legal audit reports

Links to other pages

• IRS official page on Exempt Organizations
• ECFA article on Church Nonprofit Compliance
• Christianity Today’s guide on Church Legal Issues

This blog post is intended for information and does not give legal advice. You are not a customer of Church Law and Strategy or its agents just because you read this. Please talk to a lawyer who knows your church or organization well for specific legal advice.