Every individual has a unique ID, like a Social Security Number.
Just like that, every business entity in the United States needs some sort of unique number for identification.
That is an EIN.
Let us understand what exactly an EIN is and when a business needs it.
What is an EIN?
EIN, Employer Identification Number is a unique nine-digit number issued by the IRS to business entities operating in US, for the purpose of identification.Think of EIN as the Social Security Number(SSN) for your business.
EIN is also referred to as Federal Employer Identification Number(FEIN) and Federal Tax Identification Number(FTIN).
This is important to know.
Question arises: when MUST you have an EIN?
- If you have an employee
- If you file excise or pension plan returns
- If you are a partnership/corporation
- To register for your State’s employer taxes
That’s pretty much every business out there.
The only exception is if you’re a sole proprietorship without an employee. Then you don’t legally need an EIN. You can use your SSN in most of the cases.
Why is EIN helpful?
Now you might wonder why such an identification is useful.
As it turns out, it is pretty important for a lot of things:
- EIN is how the IRS tracks your business for tax purposes.
- EIN is required to identify you as an employer so you can pay your employees.
- EIN helps to maintain the corporate veil if you are an LLC.
- Banks, credit unions, and brokerage houses often require EIN to open accounts.
- EIN is required in Amazon FBA, Google Ads, Shopify, PayPal, Stripe merchant accounts.
Even if you’re a sole proprietorship, most banks and other financial institutions ask you for an EIN.
And it is pretty easy to get an EIN.
Apply for EIN
How to apply for an EIN?
If you have any sort of Taxpayer Identification Number( SSN or ITIN), you can apply for EIN online. It is absolutely free.
You just have to fill up the application form on IRS website.
After completing the form, you’ll immediately get your EIN. You can download and print your EIN confirmation notice.
Alternatively, you can apply for EIN offline by sending your Form SS-4 by mail or fax(855) 641-6935.
Also, if you are an LLC or a corporation, you must register your business and get approved before getting an EIN. Because IRS will ask for your legal business name and its date of formation while applying for EIN.
Entities owned by non residents cannot elect to be an S-Corp. US residency is one of the conditions of IRS to be an S-Corp
And how long will it take to receive EIN?
- If you apply online, you’ll get it immediately.
- If you mailed in your Form SS-4, it will take about 4-5 weeks to reach you.
EIN Confirmation Letter
After IRS issues an EIN for your business, they will send you a EIN confirmation letter in Form CP 575 in about 8-10 weeks.
They do not email or fax it. They only send it by mail.
Certain banks or vendors may ask for this confirmation letter inorder to open accounts. So, it is a good idea to keep it safe.
Here’s how an EIN confirmation Letter looks like:
And if you happen to lose this original letter, don’t worry. You can request IRS for a replacement letter called 147c letter.
If you wanna get same day 147c letter online:
Get a fax number ready
IRS can only send the 147c letter to a fax number. Since it’s unlikely that you have a fax number, you will have to get a virtual fax number.
Get your business documents ready
IRS agent will need to verify that you are authorized to get a 147c letter. So, they’ll ask you questions about your business registration, EIN number, phone number, current address, etc.
Call IRS at 800–829–4933
Once you are in the main menu press #1 for EIN information and then #3 to get EIN confirmation. After that, you may have to wait up to an hour to speak with a representative.
Get the letter faxed
After answering all the verification questions, the representative will fax you the confirmation letter.
That’s it. It is not the smoothest process, but it works.
Because of COVID, your EIN Confirmation Letter (CP 575) could take anywhere from 2.5 – 3 months from the date of application.
Canceling an EIN
How to cancel an EIN?
EIN in general, is never cancelled. It is never reassigned to another business, even if your business never used it.
But, if you’re shutting down your business, you can close your business account with the IRS and that will cancel your EIN.
To close the account, send a letter to the IRS and include the following:
- The complete legal name of the business
- The business EIN
- The business address
- The reason you wish to close the account
- EIN confirmation notice you received when it was assigned to you.
IRS will close your business account only after you have filed all the required returns and paid all the taxes.
Frequently Asked Questions About A DBA
Here are the most commonly asked questions about forming a DBA:
Nothing. IRS issues EIN to business entities for absolutely free.
When IRS issues the EIN, they typically send a mail or a physical letter. That confirmation letter should have your EIN. You could also find it on your tax returns or your bank documents. If you are unable to find it anywhere, you can call up IRS on Monday through Friday between the hours of 7 a.m. to 7 p.m., Eastern Standard Time. Phone number for the Business & Specialty Tax Line is 800-829-4933.
If you have employees or if you file excise or pension returns, your LLC needs an EIN.
None. There is no difference between the two. Taxpayer Identification Number and Employer Identification Number refer to the same nine-digit number issued by the IRS.