Simply put, an EIN, short for Employer Identification Number, is a unique nine-digit number that is assigned by the IRS (Internal Revenue System), to business entities operating in the United States, primarily for purposes of identification, but also for other things such as employment tax reporting. An EIN can also sometimes be referred to as a FEIN (Federal Employer Identification Number), the FTIN (Federal Tax Identification Number) or the TIN (Taxpayer Identification Number). It is referred to as a TIN when used for identification more than tax reporting.
Why do I need an EIN?
There are some reasons why it’s absolutely necessary for you to have an EIN – for legal requirements, and here are some reasons why you might need one. If any of these apply to you, you should get an EIN:
- You have employees
- You are a corporation or a partnership
- You file for any of these tax returns: employment, alcohol, tobacco, firearms or excise
- You have a Keogh Plan
- You’re involved with any of the following: certain trusts, organisations or non-profit organizations
Why would I want an EIN?
Apart from the obvious reasons you’ll need to have an EIN, there are so many reasons you’d simply just want to get one. Here are a few:
- Banking and finance: in many banks and credit unions you are required to have a valid EIN to open a bank account for any type of business. And having an EIN can also help if you’re looking to obtain financing, or working capital, by helping you build credit and qualify for more loans.
- Hiring employees – employees file their taxes separately, and employers need an EIN in order to set up payroll. The IRS will use the business’ EIN to track payroll taxes for taxpayers. You also need an EIN to register for your State’s employer taxes.
- Maintaining your corporate veil: a corporate veil is what protects business owners from personal liability. Maintaining it keeps owners of a business safe and also establishes professionalism by giving your business an identity that’s separate from its owners. Having an EIN gives your business its own unique identity.
- Identity theft: an EIN is a specific number just for you, it will be hard for someone else to steal your business from you. This also means your Social Security number ends up being more private, and so it’s less likely that someone will break into your accounts – business finances and personal finances are separate.
How do I get an EIN?
There are various ways you can get an EIN – online, telephone, by fax or by mail. We recommend online, as it’s the fastest way to get an EIN immediately. Fortunately, the IRS does not charge for the service – so whichever way you decide to get an EIN, it’s free.
When applying online, you can do so Monday to Friday, 7a.m. to 10p.m. and must have a valid taxpayer’s identification number, like an SSN. If you make an error you’ll have to try again the next day. The session will timeout within 15 minutes, so it’s important you have all important information on hand.
On the phone you can contact an IRS representative on 800-829-4933 and answer a few short questions. With both of these methods, as soon as you’re done you should get an EIN on the spot.
If you’re faxing or mailing, you need to fill out Form SS-4 and send it off. You’ll need to provide information such as the number of employees in your business and the nature of activities. With mail it can take up to 4 weeks and by fax it can take 4 business days for your application to be processed and for you to receive an EIN.
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