If you want to start a business you have to learn how to get an Employee Identification Number (EIN). Getting an EIN is fast and easy, requiring only basic information. And even better, most of the application process takes place online. Obtaining an EIN will help you manage your finances and offers advantages like increased security when conducting business transactions and access to special borrowing privileges from lenders. So, what is an EIN, and how can you get one? Let’s find out.
What Is an Employee Identification Number?
An EIN is a unique nine-digit identification number issued by the IRS that helps to identify individual businesses or organizations. EINs are used to make sure accurate records are kept, taxes are reported correctly, and employees receive all benefits due to them. EINs can be found on pay stubs, tax documents, and other related financial paperwork. They are essential for employers to comply with government regulations regarding payroll and deductions. An EIN is usually assigned upon hire and used throughout the employee’s employment period. It serves as a simple way for employers to keep track of their employees’ information efficiently.
Who Is Eligible for an EIN?
There are two requirements you need to meet to be eligible to receive an EIN from the IRS:
- Your business is located within the U.S. or its overseas territories.
- You possess a government-issued Social Security number or other valid tax ID.
Who Needs an EIN?
Generally, any business entity required to file taxes with the Internal Revenue Service must first obtain an EIN. This includes corporations, partnerships, and LLCs. Even certain businesses with employees not based in the United States are also required to have a valid EIN.
If you are unsure whether you should submit for an EIN, it is best to consult irs.gov directly. There are certain categories of taxpayers listed by the IRS that must file for Employee Identification Numbers. They are:
- Individuals who have employees
- Those who operate a business as a corporation or partnership
- Those who file employment, excise, alcohol, tobacco, or firearms tax returns
- Those who withhold taxes on income paid to non-resident aliens of the U.S.
- Those who have a Keogh plan
For more information about who needs an Employee Identification Number, visit https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-an-ein.
Why Should You Use an EIN Instead of a Social Security Number?
When it comes to business, an EIN should always be used in place of a Social Security Number. One of the greatest advantages of using an EIN is that it separates your personal and business finances, providing a more secure system for keeping track of business activities such as transactions and tax payments. In addition, since one taxpayer can only possess one Social Security number, obtaining an EIN is especially important for business owners who want to open multiple business operations. By making use of an EIN, business owners can easily distinguish individual businesses from each other and keep them financially separated. An EIN also makes it easier for businesses to hire employees and makes tax filing simpler.
How Do You Apply for an Employee Identification Number?
The Internal Revenue Service (IRS) issues Employee Identification Numbers, and the fastest and easiest way to obtain one is online. So your journey of applying for an EIN should start at irs.gov. The process is straightforward. You must first access an SS-4 form on the IRS website and fill it out. After filling out the necessary information and submitting your form online, you should receive your EIN immediately.
If you prefer, you can also submit your application by mail or fax to the address provided on the form, but be aware that this will cause delays in processing your application. On average, it takes four weeks to receive an EIN by mail. Remember, receiving an EIN from the IRS is of critical importance in setting up a business, as it will be essential for communicating with certain governing authorities and filing taxes. So time is of the essence when you apply for one!
Regardless of how you apply for an EIN, keep a record of your confirmation number sent via email when applying online, so you have proof of payment if needed later.
When Should You Apply for an EIN?
Before you obtain an EIN for your business, it’s important to make sure your organization is officially recognized and meets all legal requirements. Once your company is legally formed, you can apply for an EIN and take the necessary steps toward optimizing the potential tax benefits available. Until then, wait to make this financial decision until your organization is recognized by the government as a viable entity. Investing time and resources into forming the necessary legal documents can go a long way in making sure your business is operating within the scope of what is permitted for the particular industry or sector.
Is Your EIN the Same as a Tax-Exempt Number?
What if your organization is tax-exempt? Examples of such entities are religious institutions and certain nonprofits. Does your EIN count as your tax-exempt number in this scenario?
No, it does not. Your tax-exempt ID is a different number. State revenue departments generally govern these numbers.
Recap: What You Need To Know About Filing for an Employee Identification Number
Business owners need to file for an EIN if they want to open a business bank account or hire employees in the United States. EINs are also required if you plan to get credit for your business in the form of loans or participate in other financial proceedings. Obtaining an EIN is easier than ever before — all you need to do is visit the IRS website and submit Form SS-4 online. You should receive confirmation of your application within minutes, and, once confirmed, you’ll be good to go.
Don’t miss out on important legal and financial opportunities — apply for your Employee Identification Number as soon as possible to make sure that your business is on track for success!