What Is an EIN and How to Get it for Your Business?

What Is an EIN?

EIN stands for Employer Identification Number. It is a unique nine digit number which is allotted to the business. With an EIN, the Internal Revenue Service (IRS) identifies the business easily. Businesses use EIN to report taxes in the United States. The format of this number is xx-xxxxxxx.

The other name of EIN is Federal Tax Identification number because the Federal government of the USA issues this number.

Key points about EIN –

• Employer Identification Number never expire
• If the business gets closed, its EIN is never assigned to another business
• Employer Identification Number is not required when the company is taxed as an S-tax
• A new EIN will be required in the case of a business structure change or the merger of a corporation with another corporation.

Where Employer Identification Number is Useful?

After knowing the EIN definition, let’s explore its uses. The employer identification number is useful for tax filing purposes, during the account opening and hiring of employees. The Internal Revenue Service uses EIN to perform business tracking. In the case of tax administration, this EIN is only useful for income tax. However, sales tax does not include this purpose.

Sales taxes are operated at the state and local level in the USA and EIN usage scope is at the national level. However, while registering for sales tax in the new state, business professionals are required to provide an Employer Identification Number.

Who Needs an EIN?

As mentioned above EIN is useful for businesses during their tax filing, this number finds its application in various industries. Partnership-based businesses, mid-size LLCs, and corporations use EIN.

If the business is a sole proprietorship and has employees then also an EIN is valuable to file payroll taxes. Single-member LLCs without employees can utilize the Social Security Number, instead of EIN.

Organizations that need an EIN are as follows –

• File tax returns for excise, employment, alcohol, and tobacco
• Profession with a Keogh plan (a tax-deferred pension plan)
• Nonprofit organizations
• Plan administrators
• Apply for a loan or credit
• Payroll of employees
• Hire employees
• Payroll process

Types of organizations that require an EIN –

• Real Estate mortgage investment conduits
• Farmers’ cooperatives
• Except for certain grantor-owned revocable trusts and IRAs
• Plan Administrator
• Non profit organizations
• Planning administrator

How to Acquire an EIN?

You get the EIN meaning, but how to get it is another part of the story. The IRS website offers an easy way to get an EIN free of cost. If accidently you come across the wrong website that asks for payment, the IRS warns and makes you alert.

This website offers crucial information in different languages – English, Chinese, Spanish, Korean, Vietnamese, Russian, and Haitian Creole.

Professionals must have the information ready before completing the application.

• Name of the business
• Business address
• Business entity type
• Name of the company’s principal officer and trustor along with their TIN
• Reason to apply for an EIN

You’ll need to keep a note of the following points before applying for an EIN.

• EIN is only needed for the US and its territories-based businesses.
• You must know who is your responsible party (someone who controls the business).

Professionals will receive an EIN within a few hours, once they submit an online application.

How to Receive EIN for a Business Running in the USA?

For the USA-based business, the full name and Taxpayer Identification Number (ITIN, SSN, or EIN) of the following person –

• The main owner of the business
• Other roles like general partner, principal officer, grantor, or trustor

Further, you can go ahead with any of the options –

Online Apply

In this method, you need to fill out the online IRS application on its official website. Online application is a quick process and the most preferable way for the IRS. Users will get a federal business tax ID immediately.

Fax or Snail Mail Apply

Users need to fill out the Form SS-4 to apply by fax or snail mail. You must be sure to offer the correct information while opting for this method. This is a bit of a manual and old process so it takes longer than applying online. You need to send the filled SS-4 form to the below address –

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

The fax application will take about 4 business days and 4 weeks will be required by mail.

How to Receive EIN for a Business Running Outside the USA?

The online application option is unavailable for Non-United States based businesses. Businesses coming in this category need to apply by phone or snail mail or fax.

Choose Phone

To get the federal tax ID, non-US businesses may call 267-941-1099 from Monday to Friday at the time 6 am to 11 pm (US Eastern Time).

Ensure that the call making person is authorized and responds to Form SS-4 questions. This call is not a toll-free number and charges will be applicable.

Choose Fax or Snail Mail

This process is cost effective as compared to an international phone call. Additionally, it is easy to perform. You must fill out Form SS-4 with the correct information. You have to send the completely filled form to the below address –

Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Fax: (855) 215-1627 (for USA) or (304) 707-9471 (for outside USA)

Advantages of an EIN Number for the Business

An EIN is a valuable element for a business. Every professional before starting a business must receive this number. Here are some merits that EINs offer to businesses.

Differentiate Between Business and Personal Finance

EIN is helpful to keep your finances different from business capital. This is majorly useful for independent contractors and freelancers. Business professionals can perform various financial transactions using unique identifiers. Through EIN, it is possible to open a separate business bank account, take a separate business loan, and tax filing. Thus, there is a systematic finance management of the business.

Prevent the Chances of Identity Theft

EIN is a fantastic substitute for social security numbers. Businesses can give EINs instead of sharing social security numbers. Businesses are not required to give the social security number of the actual SSN to the vendor or the customer. This minimizes the likelihood of theft of personal information. Moreover, sharing an EIN looks more professional, rather than sharing a personal social security number.

Give More Loan Opportunities

Acquiring bank loans without an EIN is possible. However, some banks need an EIN to approve business loans. To get a bank loan, it is compulsory to have a business checking account that needs an EIN. Businesses avail high loan opportunities with EIN.

Hire Employees and Payroll Purposes

EIN is mandatory when you have employees in your organization or hire an employee in the future. Even it will be worth applying and getting an EIN if your company has no employees. This is because it helps in running the payroll process easily. If you have no employees, then also acquiring an EIN will not be the wrong thing.

Credit Building

EIN is an essential element in forming a company’s credit history. Developing credit for the business is helpful as financial needs get explored. In such cases, you can use business credit instead of your own.

Taxpayer Identification Number (TIN) vs Employee Identification Number

A Taxpayer Identification Number broadly refers to different types of identification numbers. It would be right to say EIN is a part of TIN, thus the TIN is generic. It covers the following numbers –

• Social Security Number (SSN)
• Employer Identification Number (EIN)
• Taxpayer Identification Number for Pending US adoptions (AITN)
• Preparer Taxpayer Identification Number (PTIN)
• Individual Taxpayer Identification Number (ITIN)

TIN is a social security number for sole proprietorships whereas EIN is for corporations, trusts, partnerships, and estates.

Last Word

Hope you have a clear picture of what is an EIN, through this blog. Remember, EIN is a crucial part of the business for tax filing, hiring employees, and other purposes. Thus, business professionals must get an EIN early to run their profession smoothly.

Frequently Asked Questions