Simone Lawson
Political organizations in the US are subject to tax under IRC section 527 and must have an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, to open a bank account. This is a nine-digit number issued by the IRS to identify taxpayers who are required to file various tax forms. To obtain an EIN, an organization must complete IRS Form SS-4 online or via mail, fax, or phone. This number is required to open a bank account for a political campaign, and the account must be in the name of the committee and not an individual.
| Characteristics | Values |
|---|---|
| Name | Employer Identification Number (EIN) or Federal Tax Identification Number |
| Who needs it | Political committees, political parties, campaign committees for candidates for federal, state or local office, and political action committees |
| How to obtain | File Form SS-4 online, by fax, or by mail |
| Where to obtain | IRS |
| Contact | 1-800-829-3676 or 800-829-4933 |
| Website | http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN |
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What You'll Learn
- Political committees must obtain an Employer Identification Number
- All bank accounts must be opened in the committee's name
- A separate segregated fund (SSF) must pay taxes on interest income
- Most tax-exempt political organisations must file periodic reports
- A candidate who self-funds a campaign may choose not to open a campaign bank account
Political committees must obtain an Employer Identification Number
Political committees are required to obtain an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, even if they have no employees. This is a unique, nine-digit number that is used by the IRS to identify taxpayers who are required to file various tax forms.
To obtain an EIN, a political committee must file Form SS-4, Application for Employer Identification Number. This can be done online, by phone, or by submitting a paper form via fax or mail. The quickest way to obtain an EIN is via the IRS website. The committee will need this number to open a bank account, and it is important to note that the account must be opened in the name of the committee, using its EIN. Bank accounts should never be opened in an individual's name using their Social Security Number.
In addition to obtaining an EIN, political committees must also comply with other tax and filing requirements. Political parties, campaign committees for candidates for federal, state, or local office, and political action committees are all considered political organizations under IRC Section 527 and are subject to tax. These organizations may be required to file periodic reports, such as Form 8872, Political Organization Report of Contributions & Expenditures, and Form 8871, which must be filed within 24 hours of the organization's creation. To file electronically, the organization will need the username and password received from the IRS after filing its initial notice.
It is important for political committees to consult the relevant government websites, such as the IRS and FEC, to ensure they are complying with all the necessary requirements and to seek guidance from a tax professional if needed.
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All bank accounts must be opened in the committee's name
When opening a bank account for a political campaign, it is important to note that all bank accounts must be opened in the committee's name. This means that the account should be registered under the committee's name and not that of an individual. The account should be associated with the committee's Employer Identification Number (EIN), also known as a Federal Tax Identification Number.
An Employer Identification Number is a requirement for political committees and organisations. This nine-digit number is used by the IRS to identify taxpayers that are required to file various tax forms. It is important to note that the EIN is different from the FEC committee ID number. The quickest way to obtain an EIN is by applying through the IRS's website, or by completing and submitting IRS Form SS-4.
When opening a bank account for a political campaign, the chosen financial institution may request the committee's EIN. This is a standard requirement for campaign accounts, which can be opened in a bank, mutual savings bank, savings and loan association, or credit union. The IRS issues these tax ID numbers, and applications are accepted online, by fax, or by mail.
It is important to emphasise that the bank account should be opened solely in the committee's name, with its associated EIN, to ensure compliance with tax regulations and to maintain transparency in financial transactions related to the political campaign.
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A separate segregated fund (SSF) must pay taxes on interest income
A separate segregated fund (SSF) is a corporate- or labour organization-sponsored political committee, commonly referred to as a "political action committee" or PAC. An SSF is a fund that is treated as a separate political organization and is subject to tax under IRC Section 527.
An SSF must use its own funds to pay taxes on interest income. This means that any interest earned on investments made by the SSF, such as savings accounts, money market funds, or certificates of deposit, is taxable. The interest income must be reported in the "Other Receipts" category (Line 17) of the Detailed Summary Page. If the interest income received from a single source exceeds $200 in a calendar year, the interest must be itemized on a Schedule A for Line 17.
It is important to note that the connected organization, which is typically the corporation or union sponsoring the SSF, may use its general treasury funds to pay for the establishment, administration, and fundraising costs of the SSF, but it cannot use these funds to pay taxes on the SSF's interest income. Federal and state taxes on SSF funds are not considered administrative expenses payable by the connected organization.
To ensure compliance with tax requirements, the SSF must have its own Employer Identification Number (EIN), even if it does not have any employees. This can be obtained by filing Form SS-4 with the Internal Revenue Service. Additionally, the SSF may be required to file Form 8871 to be tax-exempt, depending on the specific circumstances.
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Most tax-exempt political organisations must file periodic reports
Political organizations are subject to tax under IRC section 527. This includes political parties, campaign committees for candidates for federal, state, or local office, and political action committees. These organizations are generally required to file one or more of the following:
Firstly, a political organization must have its own Employer Identification Number (EIN), even if it does not have any employees. An EIN is obtained by filing Form SS-4, and all bank accounts must be opened in the name of the organization using this number. Secondly, many political organizations must electronically file periodic reports. Form 8872, the Political Organization Report of Contributions & Expenditures, must be filed by most tax-exempt political organizations. This form can be filed electronically using the organization's username and password, received from the IRS after filing Form 8871.
It is important to note that federal tax reports and returns filed by section 527 political organizations are often subject to public disclosure by the IRS and the organization itself. Therefore, these organizations must be mindful of the public nature of their financial information.
In addition to the above, there are other requirements and considerations for political organizations regarding taxes and filings. For example, separate segregated funds (SSFs) must use their own funds to pay taxes on interest income, and federal and state taxes on these funds are not considered administrative expenses payable by the connected organization.
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A candidate who self-funds a campaign may choose not to open a campaign bank account
A candidate choosing to self-fund their campaign may opt against opening a dedicated campaign bank account. However, they must still indicate on their registration which bank would be utilised if an account were opened. In the absence of a campaign account, the candidate is required to make their check register and personal bank account records available for public inspection. This ensures a degree of transparency and accountability, even when the candidate relies primarily on personal funds.
While a separate campaign account is not mandatory for self-funded candidates, it can offer certain advantages. For instance, it simplifies the process of tracking and reporting campaign-related expenses. By segregating campaign finances from personal finances, candidates can more easily demonstrate compliance with applicable laws and regulations. This separation also facilitates more efficient record-keeping and financial management, particularly when it comes to reconciling expenses and contributions.
Additionally, a dedicated campaign account can provide a layer of protection for the candidate's personal finances. By keeping campaign-related transactions separate, candidates can minimise the risk of personal financial exposure in the event of legal or regulatory issues arising from campaign activities. This separation also ensures that personal finances remain confidential and are not subject to public scrutiny, maintaining the candidate's privacy.
In some jurisdictions, specific requirements and options exist for managing campaign finances. For example, in Montana, USA, candidates can utilise a variety of financial institutions, including banks, credit unions, and savings and loan associations, as campaign depositories. However, all Montana banks now require an Employer Identification Number (EIN), which must be obtained through the Internal Revenue Service (IRS). This EIN is a crucial identifier for tax purposes and is necessary for all bank accounts associated with political committees.
Overall, while a self-funding candidate may opt against opening a dedicated campaign bank account, doing so can offer benefits in terms of simplified financial management, regulatory compliance, and personal financial protection. Additionally, specific requirements, such as the need for an EIN in certain jurisdictions, should be carefully considered when making decisions about campaign finances.
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Frequently asked questions
A Tax ID, also known as an Employer Identification Number (EIN) or Federal Tax Identification Number, is a nine-digit number used by the IRS to identify taxpayers that are required to file various tax forms.
Yes, political campaigns are considered tax-exempt organizations and are required to obtain a Tax ID.
To obtain a Tax ID, an organization must complete and submit IRS Form SS-4, Application for Employer Identification Number. This can be done online, by fax, or by mail.
The Tax ID is used to identify the campaign committee as a taxpayer and is required to open a bank account and file tax returns. The bank will report any interest earned on the campaign account to the IRS using the Tax ID.
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