What is an EIN?
An Employer Identification Number (EIN) is a unique number assigned by the United States Internal Revenue Service (IRS). The EIN is used to identify a business for purposes of filing taxes and other business-related reasons. When taxpayers file various business returns, the IRS requires an EIN on the tax return to identify the business. An EIN is used by a variety of entities, including sole proprietors, employers, corporations, trusts, estates, corporations, and non-profit organizations.
If a business has employees or operates as a partnership or corporation, it must obtain an EIN. Even non-profit organizations and some sole proprietorships must obtain an EIN from the IRS as a requirement of operating. It is free to obtain an EIN from the IRS, and it can be done online, via the IRS websites, or by mail or fax.
Furthermore, financial institutions and banks often require an EIN to open an account. Agencies may require an EIN before issuing a business license and filing employment tax reports. Sole proprietors can utilize an EIN as a substitute for providing a personal Social Security Number, thereby giving the sole business owner privacy and protection over their identity.
When the IRS issues an EIN, the nine-digit number is unique to the business entity once it is issued. The EIN cannot be transferred or reused by other organizations, even if the business assets are sold or the ownership changes. An EIN does not expire, and it does not need to be re-applied for during the life of the organization. However, if the business ownership or its entity structure changes significantly, a new EIN may be necessary.
Why Do Businesses Need an EIN?
The IRS requires businesses to obtain an EIN to administer taxes. It is used by the business to identify the entity when taxes are paid, and when employment taxes are withheld, including income taxes, social security, and Medicare taxes, from payroll.
Banks also require an EIN when a business opens an account with a financial institution and when the business applies for lending or business credit. An EIN is used by the bank to obtain a business’s creditworthiness. Government agencies generally also require an EIN to obtain a license to operate and other business permits.
During the course of operating the business, many companies may require an EIN from vendors and independent contractors in order to comply with IRS Form 1099 reporting of miscellaneous income. Further, estate planning entities, trusts, estates, and non-profits, may be required to have an EIN for tax filing and quarterly reporting purposes.
Common Uses for EINs
Within the routine operation of a business, an EIN serves a number of common purposes that are outlined above. An EIN is a prerequisite to opening a business banking account, withhold taxes during payroll after hiring employees, obtaining business credit and other lending, and most importantly, complying with the IRS’s various tax reporting requirements. Banks use EINs to ascertain the creditworthiness of a business. Businesses also provide their EIN if they are a vendor and receive 1099 income.
Identifying Your EIN Options
You have several options to obtain an EIN, each of which are free. Most commonly, you can visit the IRS website and complete the online EIN application to obtain an EIN. Alternatively, you can fax or mail a complete IRS Form SS-4 to request an EIN by mail, though this may take up to six weeks for processing. Some applicants can also obtain an EIN by calling the IRS.
Utilizing Online EIN Lookup Services
If you have access to the specific databases at the IRS, you can utilize the EIN lookup service to identity a business’s EIN, or you can contact the IRS directly to request it. If you are seeking to find your own EIN, it is locating on official documents from the IRS and previously filed tax returns. Publicly traded companies may list their EIN on the company’s public SEC filings. If you have lost your EIN, you can call the IRS Business and Specialty Tax Line to locate it.
How to Apply for an EIN
You can apply for an EIN online via the IRS’s application service on its website, which is the fastest method to apply for an EIN. Often, you will receive an EIN immediately upon applying through the site. As an alternative, applicants can request an EIN by completing the Form SS-4 and either faxing or mailing it to the IRS. International applicants can call the IRS to apply for an EIN. Each method will require the legal name, address, type of activity, and principal business purpose, of the applicant. Applying online is the most convenient way to apply for an EIN.
How Long Does It Take to Get an EIN?
As stated above, it takes about four to six weeks to obtain an EIN if the applicant faxes or mails the IRS Form SS-4, due to processing times at the various IRS service centers. It is much more convenient to apply online. When you use the IRS online portal to apply for an IRS, you will often receive the EIN immediately through the website with a .pdf file for your records.
How to Cancel an EIN
If you need to cancel an EIN after it has been assigned previously by the IRS, you can close your account by contacting the IRS. However, the number itself is not cancelled and can never be re-used by another business or entity, since the EIN is a unique identifier specific to your business. If you no longer need an EIN and wish to cancel it, you may do so by mail to request closing your account, with the name of the entity, its EIN, and its contact information.
Conclusion
As summarized, an EIN is a fundamentally important requirement for a range of business activities, including opening business bank account, obtaining business credit, applying for a business license or permit, and most importantly, complying with the various tax reporting requirements of the IRS. An EIN is a unique identifier for businesses and other entities.
