Are you planning to kickstart a business in the United States? Then, you need to apply for an employer identification number called EIN. Obtaining this number is one of the essential steps in launching a business or organization in the US.
Just as Social Security Numbers (SSNs) are used to distinguish one person from another, EINs are used to differentiate one business from the other.
This article will explore what you need to know about EINs so you can apply for one.
What Is the Employer Identification Number (EIN)?
Employer Identification Number (EIN), sometimes referred to as Federal tax ID or Federal Employer Identification Number (FEIN), is a nine-digit unique identifier assigned to businesses and organizations operating in the US. These unique numbers are assigned by the Internal Revenue Service (IRS) and are formatted as XX-XXXXXXX.
EINs are like Social Security Numbers. They are permanent and don’t expire, neither can they be transferred to another business or entity.
Who Needs To Get an EIN?
As earlier stated, EINs are issued by the IRS to identify businesses, organizations, and entities in the country. You will need to apply for an EIN if you have employees or operate your business as a corporation or partnership, such as:
- Limited liability companies (LLCs)
- Sole proprietorship
- Non-profit organizations (NPOs)
- Government agencies
The IRS isn’t biased as to who gets to possess an EIN. Even if you have one employee, you are entitled to have an EIN.
What Are EINs Used For?
This Federal Tax ID serves different purposes, including the following:
|Taxation||The main aim of an EIN is to identify a business entity for federal tax purposes. You use it when filing tax returns, reporting income, and paying federal income taxes for your business.|
|Employee payroll||You can also use EINs to report employee wages, submit employment tax payments, and withhold taxes to the IRS.|
|Opening a Business Bank Account||Most banks require an EIN when you want to open a bank account for your business or organization. The reason is that EINs separate business finances from personal finances.|
|Legal compliances||EINs are vital when applying for different permits and licenses or even when applying for a business loan.|
|Identity verification||EINs also prevent identity theft and provide a secure means of identifying businesses and organizations correctly.|
How To Apply
To apply for the EIN, all you need to do is:
- Visit the IRS website and apply directly
- Download and complete Form SS-4 with relevant documents, and a third party, which could be your assistant or secretary, can fill up some details as well
- Submit the form via fax, mail, or online
Remember, the registration process is the same nationwide.
Here is a general overview of the documentation and information commonly needed when applying for an EIN:
- Business legal name and address
- Business type
- Social Security Number or Individual Taxpayer Identification Number (ITIN)
- Purpose of applying for the EIN
- Date of formation
- Business description
- Estimated number of employees
- Form SS-4
Remember that the specific requirements may vary based on your unique circumstances, so reviewing the IRS guidelines and instructions for Form SS-4 or consulting a tax professional is advisable.
What Happens Next?
If you apply online, you will receive an EIN immediately upon submitting your application. However, if you applied by mail or fax, it may take several weeks for the IRS to process your application and assign an EIN.
Regardless of the application method, the IRS will send you a confirmation letter that includes your newly assigned EIN. It’s essential to keep a record of this letter. Once you have your EIN, you can use it when filing federal tax returns, including income tax, employment tax, excise tax returns, and other financial requirements.
How Much Does an EIN Cost?
The EIN is completely free of charge. The IRS does not charge any fees for obtaining or processing the EIN for you.
How Can a Non-US Citizen Get an EIN?
If you’re not a US Citizen and do not have an SSN, you can still get an EIN for your business operating in the US.
All you need to do is:
- Call the IRS at 267-941-1099 (not toll-free) from Monday to Friday between 7 a.m. to 10 p.m. EST
- You can also fax an application form for an EIN to 304-707-9471
Maximize Your Business Benefits
The Employer Identification Number is vital for tax and financial purposes if you’re a business owner. It also facilitates various transactions and ensures compliance with IRS regulations. Obtaining an EIN isn’t just a requirement but a foundational step in managing your financial affairs, separating personal and business finances and ensuring compliance with federal tax laws. Remember that the EIN registration is free of charge, with the IRS providing a straightforward process for obtaining it.