What’s an Employer Identification Number (EIN)?
An Employer Identification Number (EIN) is a unique nine-digit identifier assigned to businesses by the Internal Revenue Service (IRS) for tax reporting and identification purposes. The format of an EIN is XX-XXXXXXX.
Key Takeaways
- An EIN is a unique identifier for a business entity.
- It allows the IRS to easily identify businesses for tax reporting purposes.
- All businesses meeting specific criteria must have an EIN before operating.
- EIN applications are free and available on the IRS website.
- EIN facilitates bank operations and credit applications.
Understanding the Employer Identification Number (EIN)
EINs identify U.S. business entities similarly to how Social Security Numbers (SSNs) identify individual residents. Also known as a Federal Tax Identification Number, it provides information about the state where the entity is registered.
If you have employees, operate as a corporation or partnership, or file certain tax returns, you’ll need an EIN. EINs are required for entities involved with trusts, estates, and other specified organizations.
Eligible Types of Entities
- Limited Liability Companies (LLCs)
- Sole Proprietorships
- Non-profit organizations (NPOs)
- Government agencies
- Corporations
- Personal service corporations
- S corporations
- Partnerships
- Churches and church-controlled organizations
- Plan administrators
- Military entities
- Government entities
- Farmers’ cooperatives
- Indian tribal governments and enterprises
- REMIC
- Estates
- Trusts
The IRS remains impartial to a company’s size, allowing businesses with a single employee the same eligibility for an EIN as multinational corporations.
Responsibilities and Need for an EIN
The IRS necessitates certain businesses to have an EIN, particularly if they have employees, operate as a corporation/partnership, file specific tax returns, withhold taxes, or have a Keogh plan. Other entities, such as trusts, estates, and non-profits, are also required to obtain one.
How to Obtain an Employer Identification Number
Obtaining an EIN is free. Applications can be made by phone, fax, mail, or online. Applicants need to complete IRS Form SS-4, which includes essential information like the company’s principal officer’s name and taxpayer identification number.
Information Required for EIN Application
- Type of entity
- Reason for applying (new business, restructuring, IRS withholding requirement compliance)
- Start or acquisition date
- Principal industry of business
Benefits of an Employer Identification Number
EINs are unique to businesses, never expire, and are never reassigned. The critical benefits of possessing an EIN include:
- Operational authorization
- Hiring and paying employees
- Opening bank accounts, obtaining credit, and making investments
- Filing business taxes and registering state taxes
An EIN helps separate personal and business finances, providing protection from identity theft. Even self-employed individuals can benefit from having an EIN.
Managing Your EIN
Once issued, an EIN is permanent. If an assigned EIN is no longer needed, the IRS can close the business’s account. However, the EIN itself remains valid. The IRS can suspend the associated business account upon request via mail with detailed information. Startup companies that don’t launch often undertake this.
EIN vs. Taxpayer Identification Number (TIN)
A Taxpayer Identification Number (TIN) is a broad term encompassing various identification numbers like EINs, SSNs, ITINs, ATINs, and PTINs. Depending on the taxpayer’s status, the TIN provided to the IRS is used accordingly.
Types of TINs
- EIN (Employer Identification Number)
- SSN (Social Security Number)
- ITIN (Individual Taxpayer Identification Number)
- ATIN (Taxpayer Identification Number for Pending U.S. Adoptions)
- PTIN (Preparer Taxpayer Identification Number)
Recovering a Lost/Misplaced EIN
If you lose your EIN, refer to the IRS notice issued during application, financial institutions, or previous tax returns. You can also contact the IRS Business & Specialty Tax Line at 1-800-829-4933.
Conclusion
An Employer Identification Number (EIN) is essential for business tax reporting and operations. Completing Form SS-4 directly from the IRS website is required to obtain an EIN. Remember, while the EIN is a TIN, it’s not interchangeable with other identifiers under the TIN umbrella. Ensure your business acquires and manages its EIN responsibly for legal compliance and operational benefits.
Related Terms: Tax Identification Number (TIN), Social Security Number (SSN), Limited Liability Companies (LLCs), Corporations, Partnerships.
References
- Internal Revenue Service. “Do You Need an EIN?”
- Internal Revenue Service. “Form SS-4 Application for Employer Identification Number”.
- Internal Revenue Service. “How to Apply for an EIN”.
- Internal Revenue Service. “Apply for an Employer Identification Number (EIN) Online”.
- Internal Revenue Service. “Canceling an EIN - Closing Your Account”.
- Internal Revenue Service. “Do You Need a New EIN?”.
- Internal Revenue Service. “Lost or Misplaced Your EIN?”
- Internal Revenue Service. “How Long Will it Take to Get an EIN?”
