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An employer identification number, also known as an “EIN” or a “business taxpayer identification number,” is a unique nine-digit identifier assigned to companies in the United States. The ein is used by employers to file tax returns and other business related documents with the Internal Revenue Service (IRS).
Cost for Obtaining an EIN
Obtaining an EIN is completely free of charge. You may get an EIN by applying online, faxing it in, or mailing it in. The simplest and quickest option is to do it online.
Online Application
There are no documents to fill out, and the online quiz takes around 10 minutes to complete. You’ll get an EIN straight quickly if you apply online, and you may use it for most commercial reasons right away. However, you’ll have to wait roughly two weeks to utilize the EIN to submit taxes online.
Application on paper or by fax (Form SS-4)
If you want to apply by mail or fax, you must first complete an IRS Form SS-4 EIN Application. Form SS-4 is a simple one-page form to complete. To complete the form, you will need the following information:
- Name and address of the company
- The person in charge of the company (usually the same person who is filling out the form). This might be a company owner, partner, or officer).
- The responsible party’s social security number
- What kind of company do you run? (e.g. Corp, partnership, LLC, nonprofit, etc.)
- If it’s a limited liability company, how many members are there?
- Date the company was founded and the number of workers
- The last month of your company’s fiscal year
On Form SS-4, you’ll also be asked whether your projected employment tax is less than $1,000. If so, instead of filing Form 941 weekly, you may submit Form 944 yearly to report projected employment taxes. If you withhold income taxes, social security taxes, or Medicare taxes from employee earnings, you must file Form 941 or 944 with the IRS.
The processing time for faxed SS-4 applications is about one week. The processing time for mailed applications is around 4 weeks.
What Is The Purpose Of An EIN?
If you’re still reading, you’re undoubtedly asking yourself, “Do I Need an EIN?” The IRS says you need an EIN if you answer yes to any of the following questions:
- Do you run your business as a corporation, a partnership, a multi-member LLC, or a non-profit? (For additional information on business structures, see here.)
- Do you have anybody working for you (including your spouse or children)?
- Do you have a Keogh plan (a self-employed person’s tax-deferred retirement plan)?
- Do you have to submit a tax return for Employment, Excise, Alcohol, Tobacco, or Firearms?
- Do you withhold taxes on salaries paid to non-resident aliens?
- Do you work for a trust, an estate, a real estate mortgage investment conduit, a farmers’ cooperative, or a plan administrator?
You may also want an EIN if you intend to accomplish the following:
- Request payment from vendors for products or services given — When you execute work for a vendor, they will almost certainly ask for a W-9 form before paying you. A W-9 form provides information to the vendor that it needs to prepare tax returns. You must include an EIN on the W-9 form to identify your company.
- Open a bank account for your company (we recommend Bank of America)
- Apply for a business financing.
- Get a credit card for your company.
- Build business credit – Just like a personal credit score, a business credit score exists for every company. Suppliers and lenders may do a credit check on your company to see whether they wish to operate with you.
- Submit an application for government licenses or permissions, or submit a bid for government contracts.
- Form 1099s to independent contractors – If you pay an independent contractor $600 or more in a year, you must give a 1099 to them. Even if you don’t have workers, you’ll need an EIN if this pertains to you. For further information, see your accountant or tax advisor.
The basic line is that you must obtain an EIN number unless you are a sole proprietorship or a single member LLC with no workers. Even if you fit into one of those categories, an EIN may be required when applying for a business loan, obtaining a company credit card, or participating in other commercial operations.
The Advantages of Obtaining an EIN (Even If You Don’t Need One)
Legally, certain kinds of firms, such as sole proprietorships and single-member LLCs with no workers, are exempt from obtaining an EIN. When paying taxes and doing most other company operations, the owner may use their Social Security Number instead of an EIN.
Even if you are not obliged to get an Employer Identification Number, there are advantages to doing so:
1. Separates your company and personal funds.
The IRS, banks, credit card companies, and others with whom you do business can monitor your company funds separately from your personal finances when you utilize an EIN.
2. Keep single-member LLCs’ restricted liability.
One of the advantages of forming an LLC is that you are not personally accountable for the debts or liabilities of the company. Having an EIN number for your company may assist prove that it is a distinct legal entity, limiting your exposure in the event that you are sued. Corporations and multi-member LLCs, among other company formations with limited liability, are needed to obtain an EIN.
3. Reduce the risk of identity theft
In place of an EIN, sole entrepreneurs often submit their SSN to suppliers, lenders, and others. You may be more exposed to identity theft as a result of this. “An EIN won’t eliminate your chances of falling victim to identity theft (especially since small businesses are a popular target), but at least your personal accounts won’t be at risk,” says Eric Yaillen, President and CEO of The Identity Defenders, a firm that provides identity protection services for businesses.
Keep in mind that your company’s requirements may vary over time. You may begin as a modest sole proprietorship with no workers, but after a few months, you may decide to hire employees. Even if you didn’t have one before, you’ll need one at that moment.
When It’s Time To Get A New EIN
In most circumstances, once you’ve obtained an Employer Identification Number, you’ll have it for the duration of your firm. However, there are a few circumstances in which you may need a new EIN:
- You alter the structure of your company (e.g. a sole prop becomes a partnership or a corporation)
- A collaboration comes to an end, and a new one begins.
- You buy or inherit a company (learn more about business acquisitions here)
- The secretary of state issues a fresh charter to the corporation.
- You become a corporation’s subsidiary.
- A sole proprietorship files for bankruptcy protection.
The following items do not need a new EIN:
- Changes in the name of the company
- Changes in business location
- Multiple companies to run
- Bankruptcy is declared by a corporation or partnership.
What Should You Do If You Forget Your EIN?
If you applied by fax or mail, keep your EIN letter in a secure location. If you apply for an EIN online, you will be offered the option of writing down the number or printing a confirmation of your EIN. You may scan key papers like your EIN letter and put them in your accounting software, such as QuickBooks Online, for rapid reference.
If you misplace it, though, it’s quite easy to recover. You may discover it by looking up an old tax return or bank records. You may also contact the IRS’ Business & Specialty Tax Hotline at (800) 829-4933 and choose EIN from the drop-down menu.
Once you’ve reached an IRS person, explain that you’ve misplaced or lost your EIN. Before giving you the number, the person will ask you certain security questions. The owner of the company or other responsible business parties should make the call. Monday through Friday, from 7:00 a.m. to 7:00 p.m. local time, the office is open.
Conclusion
An EIN is essential if your small company has workers. Filing is completely free, and you may do it fast and conveniently online. Using a comprehensive payroll software application will help you stay in compliance with all state and federal payroll reporting and tax payment rules.
Frequently Asked Questions
What is my employer identification number EIN?
Your employer identification number is your Employer Identification Number which can be found on your social security card.
What is an Employer Identification Number EIN used for?
An Employer Identification Number, or EIN is a nine-digit number assigned to employers by the Internal Revenue Service. Its used as an identification code for business entities and also serves as a taxpayer ID on tax filings.
What is an EIN number and how do I find it?
An EIN stands for an Employer Identification Number. You need to find this number when you are looking up someones tax returns in order to know their business information.
