How Do You Set Up a PayPal Account for Donations?

How Do You Set Up a PayPal Account for Donations?

By
Gnosis Media Group

In a previous blog post, we talked about how to get donations on PayPal. We've also explained how to create a PayPal donate link for your nonprofit. But how do you first go about setting up a PayPal account for your nonprofit -- and what are the benefits of doing so?

Discounted Nonprofit Rate

By registering your nonprofit with PayPal, you get to take advantage of PayPal's nonprofit transaction fees. For normal businesses, PayPal charges a 2.9% transaction fee for all transactions. However, nonprofits are only charged 2.2%. So it pays to register. 

To register your nonprofit with PayPal, follow these three simple steps

  1. Supply PayPal with your nonprofit's tax EIN number to verify that you are a legitimate charity. PayPal may also ask for your 501(c) certification.
  2. Show proof that your nonprofit has a bank account registered in its name. You do this by providing PayPal with a blank, voided check so they can check your account and routing numbers.
  3. That's all you have to do. Once PayPal has this information, they will verify your status and set up your nonprofit account.

You can register your nonprofit with PayPal here.

Tax Deductible Contributions & Tax Exemption

Once your account is approved by PayPal, you'll no only get the nonprofit rate for transaction fees, but you'll also be able to accept tax deductible donations from donors. This means that donors can give to your charity through PayPal, and then they can write off those donations on their end-of-year tax statement. It also means that your charity is eligible for tax exemption on all donations it receives through PayPal donate transactions.

Supporting Documentation

PayPal may also ask for any of the following documentation before giving you the nonprofit rate:

  • Information about how you intend to use the money (such as donations or membership fees).
  • Your mission statement (if applicable).
  • A subordination or fundraising letter (if applicable).

PayPal does this to ensure the company is meeting its regulatory compliance obligations as well as to reassure donors that donors are in fact giving to a credible charity.

Business or Personal Account?

In order to get the nonprofit rate, you must first sign up your nonprofit for a business account on PayPal, not a personal account. (Individuals may accept personal donations. However, these donations will neither be tax deductible for donors nor tax exempt for your nonprofit.) 

It's also important to note that PayPal regularly monitors accounts for fraud. You may begin accepting donations for your nonprofit before you register your charity with PayPal, but eventually PayPal will flag your account and may even put your account on hold until you verify that you are a nonprofit. 

PayPal must ensure that donations are not collected by someone falsely claiming to be a non-profit organization, or by a group in violation of PayPal's Acceptable Use Policy, such as a hate group. PayPal's system will allow anyone to create a Donate button, but will monitor the donations for compliance with their policies.

 

Eric Bryant, November 24, 2018