Employer identification numbers, or EINs, are assigned to corporations in the United States in the same way that social security numbers are assigned to individuals. EINs are nine-digit identifiers issued by the IRS for the primary purpose of reporting payroll taxes.
EINs are granted solely for the administration of taxes and are not to be used for any other purpose. The IRS can quickly and readily identify a company using its EIN for tax reporting purposes.
When do You Need an Employer Identification Number (EIN)?
Having workers, running a business as a corporation or partnership, filing individual tax returns, or withholding taxes from non-wage income all necessitate an Employer Identification Number (EIN). That’s why, before opening for business, organizations must submit an EIN application by phone, internet, fax, or mail.
EINs can be applied for and granted to any and all types of enterprises, such as limited liability companies (LLCs), business structures with only one owner, charitable groups (NPOs), the government's departments and agencies, trusts, real estate, etc.
Benefits of Employer Identification Number (EIN)
EINs are specific to each company that receives one. However, even if the company that provided the numbers goes out of business, those numbers will not be reused.
The ability to function is the primary benefit of acquiring one. It's essential to the functioning of your company. The following are other uses for an EIN:
Staffing and compensation
Establishing credit, storing up savings, and making strategic investments
Preserving corporate walls
Tax registration for businesses and filing state tax returns
You may separate your business funds from your personal funds by obtaining an EIN. Your privacy and security will be ensured, preventing identity theft.
In most cases, the prime contractor will utilize the EIN of a subcontractor to report the subcontractor's share of the company's gross revenue to the IRS.
How Can You Apply for an Employer Identification Number (EIN)?
Formerly, businesses seeking an EIN submitted IRS Form SS-4. While the IRS frowned upon EIN applications in the past, they now actively promote them. The following are the necessary measures:
Step 1: Find out if you qualify.
You may apply for an EIN electronically if your company's primary location is in the United States or a U.S. territory. The applicant's ITIN, SSN, or EIN must be valid to process the online application. The daily EIN quota is one per responsible party.
The "responsible party" refers to the entity's ultimate owner, controller, or whoever has the most significant direct influence on the entity's management and policies. Responsible parties can only be natural persons, not corporations or other legal entities unless the petitioner is a government agency.
Step 2: Learn how to complete the online form.
You can't start and return to this application; you must do it all in one sitting. If you are inactive for 15 minutes, your session will end, and you will have to log in again.
Step 3: Application submission.
After the verification processes are complete, you will instantly receive your EIN. Your EIN verification letter is available for downloading, saving, and printing at that point.
TIN vs. EIN: the Difference Between Tax IDs and Work IDs
Simply put, any number that may be used to track a person or entity is considered a Tax Identification Number (TIN). There are several types of TINs, and one of them is EIN.
Common types of numbers that can be used as TINs on tax forms include, but are not limited to:
Social Security Number
Adoption Taxpayer Identification Number
Individual Taxpayer Identification Number
Preparer Taxpayer Identification Number
The EIN may or may not be the TIN used by the IRS, depending on the nature of the taxpayer. In many cases, a sole proprietor's TIN is the same as their Social Security Number.
There will always be a connection between your business and the EIN that has been given to it. The IRS cannot revoke an EIN ever again after it has been issued to a company or other organization.
How Can You Close Your Employer Identification Number (EIN)?
Having an Employer Identification Number is crucial for tax and legal purposes. As long as the entity has the EIN, it can utilize it whenever it's necessary. The EIN will always be linked to the entity, regardless of whether any tax returns are ever filed.
In the event that you are issued a taxpayer ID but subsequently decide you don't need it, the IRS can terminate the linked business account. Such is the situation with many promising businesses that never get off the ground.
You must send a letter via regular mail that includes your full name, company address, EIN, and the reason for closing the account. There will be no change to the EIN; only the business account with the IRS will be put on hold.
Have You Lost Your EIN? Here's What You Should Do
If you have an Employer Identification Number (EIN) for your firm but can't seem to find it, you can do one or more of the following.
Look for the IRS's computer-generated message that was sent to you after you submitted your EIN application. This letter serves as an official acknowledgment of your successful application for and issuance of an Employer Identification Number (EIN).
If you've used your EIN to apply for a state or municipal license or to create a bank account, you should notify that institution or government office to have your EIN returned to you.
If you have misplaced your EIN but know the name of the entity it belongs to, you can look for it on a tax return that has already been submitted. Put your EIN in the appropriate place on your already filed return.