What is EIN? Where can you get an EIN From?

Napoleon

— 4 min read
What is EIN? Where can you get an EIN From?

An EIN or employer identification number is a unique nine-digit number used to identify business entities to fulfill US tax obligations. Companies also use EIN to complete financial transactions and other business operations, such as hiring employees.

Having an EIN in the US is crucial; this guide will help you understand what EIN is, how important it is for your business and if EIN can be closed.

What is EIN?

This is a federal tax identifier that the US Federal Tax Authority Internal Revenue Service uses to identify businesses. The IRS issues the EIN with the information in which state your company is registered. You are required to have an EIN to run your company legally in the US. With an EIN, you will:

  • File tax returns
  • Open bank accounts
  • Hire employees

During taxation, EIN is used for tax administration at the national level, like income tax, but not a sales tax, which operates at the state level. Companies apply for EIN online, by phone, mail or fax before they start trading. Businesses that need to apply for EIN include:

  • Limited liability companies
  • Government agencies
  • Sole proprietorship
  • Non-profit organizations
  • Partnerships
  • S Corporation
  • Estates
  • Trusts

Remember, the IRS isn't biased towards the business size, so whether you have one employee or a multinational corporation, you're eligible for EIN.

In What Circumstances I Need an EIN

IRS requires certain businesses to get the EIN; the requirements are if the company:

  • Hires employees
  • Pay employees
  • Operates as a partnership or corporation
  • Files employment, excise, tobacco, alcohol and firearms tax returns
  • Withholds tax on income paid to non-US residents
  • Has a Keogh Plan
  • Apply for credit
  • Is involved in several types of organizations
    • Estates
    • Real estate investments conduits
    • Farmers cooperatives
    • Non-profit organizations
    • Plan administrators

How to Obtain an EIN

Applying for an EIN is seamless and free on the IRS website. You must fill out the SS-4 Form for EIN. Your application option will depend on your location in the US or abroad. Fortunately, the information is available in different languages, including:

  • English
  • Chinese
  • Korean
  • Russian
  • Spanish
  • Vietnamese
  • Haitian Creole

You must have this information

  • Business name
  • Business Entity
  • EIN application reason, for example, you're starting a new company or you are changing business category
  • The starting date
  • The business principal officer, owner, and their Tax Identification Number
  • The company must be located in the US territory for you to obtain an EIN online. After the information is validated, you will be issued an EIN.

There's an old-school way to get an EIN through fax or mail. You apply by correctly filling out the SS4 Form because any mistake may prolong the process. Once you've completed it, you mail the SS4 form to this address:

Internal Revenue Service

Attn: EIN Operation Cincinnati, OH 45999

Or fax it to (855)641-6935

How Does an EIN Look Like

The EIN has nine digits and has this format XX- XXXXXXX. The first two digits identify the company's location, while the last seven identify your company's particulars. Here is an example of an employer identification number: 98-7654321.

What are the Benefits of Having an EIN?

The best thing about EIN is that it is unique to every business and doesn't expire. Once the number is set, it can never be reissued to another company, even if it goes out of business.

With an EIN, you will operate your business legally; without it, you can't.

An EIN helps you to keep your company finances separate from your personal ones. This allows you to protect your personal information from identity theft.

Self-employed people like subcontractors must have an EIN, which the primary contractor can use when reporting to the IRS income paid to the subcontractor.

Can I Close an EIN?

After the IRS issues you the EIN, that number belongs to your company forever, and the IRS will not close it. You still need the EIN even when a company doesn't file returns.

However, if you get this number and decide you never need it, the IRS can close that business account but not the EIN. This happens mostly in start-up businesses that never launch. To close down a business account, you must write a letter to the IRS stating the reason for the account closure. The letter must include the business's legal name, address, and EIN assignment notice if you have a copy.   

For companies liable for business taxes or with due tax returns, you must tax the returns before filing for EIN account closure.

When Re-organizing the Business, do I Need a New EIN?

After re-organizing your company, the IRS decides whether to apply for a new EIN. However, the general rule is when a company re-organizes, it is required to change the EIN. Here are examples of re-organizations that need a change of EIN:

  • Changing from a corporation to another business structure, such as a limited partnership or an LLC
  • When forming in a new state, resulting in another state charter
  • When merging corporations, making them a new corporation
  • Changing sole proprietorship to other business entities such as partnerships, LLCs, corporations, etc.
  • Changing partnerships to different business structures such as sole proprietor, LLC, corporation, etc
  • Changing a partnership to a new partnership or when a partner opts out
  • Changes in company ownership when the EIN applicant no longer owns the company

Apart from re-organizing the company, other changes don't need the application for a new EIN. Here are cases where you don't change your company's EIN:

  • Changing business name
  • Changing or adding a location of your business
  • Corporation or partnership declaring bankruptcy
  • When selecting how the company will be taxed

How Do You Find EIN after Misplacing?

In case you misplace the EIN, you can check it on the notice the IRS sent to you when you obtained your EIN. You can also contact the financial institution where you do your banking or on your previous tax returns. Call the IRS on 1–800–829–4933 if all these fail. Ensure you have identifying information before calling the Business & Specialty Tax Line operator.

Bottom Line

An EIN is a unique business identifier that every company must have. You can use This nine-digit number to report taxes, apply for loans, and hire and pay employees. Obtaining it is free. You must fill out the SS-4 Form on the IRS website. Once your business has an EIN, it will never be canceled, but the IRS can close the business account. Have any question on how to get your EIN? Reach out to Foundeck today.

 

 

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