What is the EIN (Employer Identification Number): The EIN (Employer Identification Number) is a unique identifier for a business entity so that the Internal Revenue Service (IRS or Internal Revenue Service) can easily identify that entity.
Also known as a Federal Tax Identification Number. Often referred to as a Tax Identification Number (NIT), it identifies an organization for tax purposes.
What is an EIN number?
EINs are issued by the IRS and are unique nine-digit numbers that include information about the state where the business is registered.
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What is the difference between an EIN and a tax ID number?
The terms “EIN,” “Employer Identification Number,” “Tax identification number,” and “Taxpayer identification number” are interchangeable, but they have clear differences. In fact, the IRS has specific definitions for each of them:
- Taxpayer identification is the general term used to refer to a tax identification number.
- The employer identification number is the company’s tax identification number, or the EIN. It is also the taxpayer identification number.
- Social Security Number is a taxpayer identification number that is reserved for natural persons, that is, individuals who meet the requirements.
The Individual Taxpayer Identification Number (ITIN) is a tax identification number given to people who don’t qualify for a Social Security number, but need a tax ID.
When do I need to apply for an EIN?
Are there any other reasons your business might need an EIN? Let’s find out!
- You must file returns for FICA taxes, indirect taxes, and taxes related to the sale of alcohol, tobacco, and firearms.
- If your company withholds taxes from a non-resident alien’s income (other than wages).
- When you have a Keogh Plan, which is a retirement plan for independent workers.
A business with only one owner and no employees may not need an EIN for tax purposes. You may use your Social Security number instead of your EIN in this case. If you intend to open a commercial bank account for your company or to apply for a commercial license, however, it would be advisable to open one.
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Before submitting an EIN application, choose a person to be in charge!
On Form SS-4 (specifically in item 7a), you might be asked who will be responsible for your business. The IRS will require you to include the name and taxpayer identification number of the business owner or manager. An individual must be the responsible party: it cannot be an entity. In the event that your business has more than one partner or member, select one to be responsible to the IRS.
How do I apply for an EIN? Follow these steps.
Print the application from the IRS website, which is Form SS-4, before applying for your employer identification number. After you have completed the form, you can apply for the number. Don’t forget to have all the information on hand so that you can complete the process quickly.
Now, you can apply for an EIN in three easy steps. If you apply online or by phone to the IRS , they will give you an EIN immediately.
- Apply online for an EIN: You can apply for your EIN online using the IRS EIN assistant. Since you will not be able to save the form, you must complete the application in one sitting. By downloading the form and completing it before starting the process, you will be able to complete this process faster since you will have all the answers at hand.
- Apply by phone for an EIN: Call 800-829-4933 to reach the IRS Business Hotline.
- You may fax the EI: As well as downloading Form SS-4, you will be able to complete it and fax it to the IRS.
Note: As of May 13, 2019, the responsible person you designate on the form must have a Social Security number or an ITIN.
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Does my business need a new EIN when it is starting up?
If you change some aspects of your business, you might not need a new EIN, but if that change affects your business structure or legal status, such as converting it into a corporation, you may need to apply for a new number. Accordingly, you will have to forfeit a new EIN to the IRS if:
- Your business ends and a new one begins.
- The corporation becomes an S corporation.
- You merely change the name or address of your business.
- After a legal merger with another company, you form a new corporation.
- If you change your business type (from a sole proprietorship to a corporation, for example),
- you purchase or inherit a business that had only one owner.
- You become a subsidiary of a corporation that uses the EIN of its parent company.
When don’t you need a new EIN?
While sole proprietorships need to obtain a new EIN when they are subject to bankruptcy proceedings, corporations and partnerships do not.
Who needs an EIN?
An EIN is required by the SBA ( Small Business Act ) for any business with employees. Corporations and partnerships are also required to obtain one if they operate as non-employers. If you’re not sure if you need an EIN, you can check this IRS guide here . An EIN will be required if you meet any of the criteria on the list.
How to apply for an EIN?
Domestic applicants can apply online through the IRS EIN Assistant to receive their EIN immediately. This online tool is free of charge, and you will receive an EIN once your application has been verified and validated.
If you are an international applicant, you will need to apply by fax or mail. You should work with an experienced accountant in the United States to guide you through the process.
Be sure to visit the IRS website and resources as your business grows to learn who needs an EIN and how to apply. When you begin planning your business, we recommend that you apply for one immediately. By doing so, you will ensure that there are no delays in obtaining the right licenses and financing.
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Your EIN is not reusable
- The EIN, unlike the SSN, is not considered sensitive information and is freely distributed by many companies through publications and the Internet.
- A company’s EIN is formatted as XX-XXXXXXX. This number is used by the IRS to identify taxpayers who have to file multiple business tax returns.
- Entities wishing to do business in the United States must obtain an EIN by phone, online, by fax, or by mail. All types of businesses can apply for and obtain an EIN.
- LLCs, Limited Liability Companies, sole proprietorships, non-profit organizations, government agencies, S corporations, partnerships, estates, and trusts, etc. The IRS does not discriminate against companies based on their size. Whether you are a small business or a multinational corporation, you can get an EIN.
- A company’s EIN (Employer Identification Number) is a unique number used by the IRS to identify it easily.
- Applications are free and can be found on the IRS website.
- The business must be located in the United States and have a valid taxpayer identification number before an Employer Identification Number can be issued.
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