One of the first responsibilities for many new businesses or businesses that are restructuring is obtaining an Employer Identification Number, or EIN, from the IRS.
An EIN is a unique nine-digit number that identifies your business for tax purposes. It?s similar to a Social Security number but is meant for business related items only.
Partnerships and corporations are required to have an EIN to open a business bank account, apply for business licenses and file their tax returns. While a sole proprietorship can use either their social security number or an EIN, it is better to use an EIN so you are not giving out your social security number to vendors and other business interests. You should apply for one as soon as you start planning your business. This will ensure there are no delays in getting the appropriate licenses or financing that you may need to operate.
An EIN is also needed by any business that retains employees.
Not sure whether you need an EIN?
Review this guide from the IRS. If you answer yes to any of the questions in the list, you need to apply for an EIN.
| Do you have employees? | YES | NO |
| Do you operate your business as a corporation or a partnership? | YES | NO |
| Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? | YES | NO |
| Do you withhold taxes on income, other than wages, paid to a non-resident alien? | YES | NO |
| Do you have a Keogh plan? | YES | NO |
| Are you involved with any of the following types of organizations? • Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns • Estates • Real estate mortgage investment conduits • Non-profit organizations • Farmers' cooperatives • Plan administrators |
YES | NO |
How to apply for an EIN
Applying for an EIN is a free service offered by the Internal Revenue Service. Beware of websites on the Internet that charge for this free service.
If you are a home-care service recipient who has a previously assigned EIN either as a sole proprietor or as a household employer, do not apply for a new EIN. Use the EIN previously provided. If you can not locate your EIN for any reason, follow the instructions on the Lost or Misplaced Your EIN? Web page.
Apply Online
The Internet EIN application is the preferred method for customers to apply for and obtain an EIN. Once the application is completed, the information is validated during the online session, and an EIN is issued immediately. The online application process is available for all entities whose principal business, office or agency, or legal residence (in the case of an individual), is located in the United States or U.S. Territories. The principal officer, general partner, grantor, owner, trustor etc. must have a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number) in order to use the online application.
Apply by Fax
Taxpayers can fax the completed Form SS-4 (PDF) application to the appropriate fax number (see Where to File Your Taxes (for Form SS-4)), after ensuring that the Form SS-4 contains all of the required information. If it is determined that the entity needs a new EIN, one will be assigned using the appropriate procedures for the entity type. If the taxpayer's fax number is provided, a fax will be sent back with the EIN within four (4) business days.
Apply by Mail
The processing timeframe for an EIN application received by mail is four weeks. Ensure that the Form SS-4 (PDF) contains all of the required information. If it is determined that the entity needs a new EIN, one will be assigned using the appropriate procedures for the entity type and mailed to the taxpayer. Find out where to mail Form SS-4 on the Where to File Your Taxes (for Form SS-4) page.
Securing an EIN is a necessary step to establishing your business and will ultimately help in keeping your regulatory, legal and financial matters in order.