Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses for identification purposes. It is also known as a Federal Tax Identification Number. EINs serve as a way for the government to keep track of a business’s tax returns, payments, and refunds. They are used by other government agencies and financial institutions to identify businesses for various purposes.
EINs are mandatory for all businesses that have employees, operate as a corporation or partnership, or have certain tax filings. This includes sole proprietors who file certain tax forms, such as the 1099-MISC. Without an EIN, businesses cannot open a bank account, apply for loans, or obtain business licenses.
Form SS-4 is the application form used to obtain an EIN from the IRS. The form requires businesses to provide basic information such as their legal name, mailing address, and business structure. Other important fields on the form include:
- Reason for applying: Businesses must specify the reason they are applying for an EIN, such as starting a new business or hiring employees.
- Responsible party: This is the person or entity that controls, manages, or directs the business. The responsible party must provide their name, Social Security number, and contact information.
- Business activities: Businesses must describe their primary business activities, such as manufacturing or retail sales.
- Date the business started or acquired: This is the date the business first started operating or was acquired by the current owners.
- Closing month of accounting year: This is the month in which the business’s annual accounting period ends.
It is important to fill out the SS-4 form accurately and completely to avoid delays in obtaining an EIN. The form can be submitted online, by mail, by fax, or by phone. Please note that the owner needs to be a US resident to submit SS-4 online and non-residents can only apply by fax. If submitted online or by phone, the EIN can be obtained immediately. If submitting by mail or fax, it can take up to four weeks to receive the EIN.
One of the main advantages of having an EIN is that it separates a business’s tax obligations from those of its owners. This means that business owners are not personally liable for the business’s tax debts. Additionally, it allows businesses to file taxes electronically, which is faster and more efficient than paper filings.
Once obtained, businesses should keep their EIN on file and use it when completing tax forms or conducting other business-related activities. It is important to note that EINs are not transferable between businesses. If a business changes ownership or structure, it must apply for a new EIN.