If you are involved in any type of financial transaction in the U.S., don't skip the EIN.
EINs are used to report employment taxes and are the means through which essential tax-related details are made available under a single platform.
It also helps the revenue department to distinguish the two businesses with similar names.
And if you're running a business in the U.S., you have to get an EIN number.
But the problem that most people face is that they don't have any idea about how to get an EIN number.
If you're also one of them, don't worry.
In this post, we'll show you how to apply and get an EIN number quickly, along with some frequently asked questions that you might have in your head.
What is an EIN Number?
Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue System (IRS). It is primarily used to report employment taxes. Also known as federal tax ID numbers is just like a Social Security Number (SSN) for your business. They never expire or are never reissued to other businesses.
What Does Having an EIN Mean?
EIN is a unique identifier assigned to a business entity to help it quickly identify the IRS. It is used by employers while filing various tax returns.
All businesses in the U.S that meet specific criteria need to have an EIN before starting their business operations.
Despite the business size or the type of business you own, you require an EIN to file your tax return and even to open a business banking account.
Thus it helps eliminate using a personal Social Security Number.
There are many benefits of having an EIN. These are:
- Protects you from identity theft: EIN allows you to share with clients the number linked to your business finance only, instead of your finances. Thus it protects you from identity thefts.
- Helps you get more work: Many companies require proof that you are operating as a business to assign you work. EIN establishes that you are a sole proprietor, and thus it adds credibility to your business.
- Allow you to open a business bank account: Many banks demand an EIN for opening a business account. Keeping your business accounts separate from personal accounts make your transactions clear in the case you need audited.
- EIN ensures faster loan applications: Banks need business credit to assess loan applications. EIN helps build your business credit, making your loan application reviewed faster.
- You want an individual 401(K) or SEP-IRA: The U.S. offers many tax-deferred retirement savings options. Two of these most famous are individual 401(K)s, and SEP-IRAs. These schemes allow self-employed individuals to contribute up to $64,500 per year. To invest in these schemes, having an EIN is mandatory.
Requirements to Get EIN Number
The EIN application process begins with preparing IRS form SS-4 for the business. The completed form has to be submitted to the relevant agencies.
The following information is required to be filled in the application form:
- Name of the business owner or the person responsible for the business
- SSN, or EIN of the responsible party
- Name of the business
- Street address, along with mailing address
- Type of business entity (corporation, partnership, etc.)
- Reason for applying
- Date the business was incorporated
- Number of employees on payroll and expected in next 12 months
- The date you will start paying wages
- Nature of business (Construction, manufacturing, retails, service industry), along with its primary activities
- Number of members while applying as an LLC
Apart from that, businesses that are going to change their ownership structure need to apply for a new EIN.
For example, sole proprietors planning to incorporate their businesses need to apply for a new EIN.
How to Apply For EIN Number (Step by Step Process)
EIN can be applied for free from the IRS department, and you don't need any special knowledge while applying for it.
To get an EIN, the business must be located in the U.S., And the person who is applying must have a Social Security Number (SSN) or Taxpayer Identification Number (TIN).
You can apply for EIN by U.S mail, telephone, fax, or online. Usually, you will get this number immediately upon applying.
In fact, an individual should apply for an EIN when they first launch their business. The overall process is simple and free through the IRS. However, if you choose to apply through a service agent, you will have to pay a small fee as their service charge.
But this saves a ton of time and energy, which isn't a bad idea, right?
Following the steps below, you can apply for EIN pretty easily:
Step 1: Determine Your Eligibility for Obtaining an EIN
You need to fulfill two basic requirements while applying for an EIN
- Your business operations must be in the U.S or U.S territories
- You must possess a valid taxpayer identification number, like a Social Security Number
Note that an applicant doesn't necessarily be the business owner. They can be a partner or anybody who manages the company's financial activities.
Secretary or assistant can also apply on the company's behalf provided that a responsible party signs Form SS-4 and fill out the third-party designee section.
Step 2: Collect all the necessary Documents
Gather all the information needed by the IRS while applying for an EIN. You can go through the From SS-4 thoroughly to understand what all information is required. Also, we have already explained all the necessary details needed to get your EIN in the above section.
Ensure that each information you provide is well supported with valid documents. It is recommended to review Form SS-4 before you begin the online application process, ensuring that nothing is left unanswered.
Step 3: Submit the Form SS-4
You can submit your application for EIN online, by mail, or through fax. IRS facilitates the applicants who are currently overseas to apply by phone.
However, the online application procedure is the easiest and fastest method for applying an EIN.
To Apply Online
You can submit your application online on the IRS website. Remember that you need to complete the application process in one session, and you are not allowed to save your application and return to do amendments.
The IRS online EIN assistant will guide you step by step to help you apply.
The assistant takes you through the overall process and provides you with links for the information you may require.
Online application is available from Monday to Friday, 7.00 am to 10.00 pm EST.
Ensure to apply in one go, and you will be automatically logged out after 15 minutes, for security reasons. Also, each party is allowed to apply for one EIN per business day.
Once you submit your application online, you will get a confirmation letter. Usually, the IRS generates and issues EIN instantly once they receive an application.
To Apply by U.S Mail
To submit your application in hard copy via mail, you will first have to get a copy of the form SS-4 from the IRS website. Fill out the form and attach the necessary documents and mail it to:
Internal Revenue Service
Attention: EIN Operation
Cincinnati, OH 45999
Once the IRS receives your application, they will check the information provided and will issue an EIN typically in four to six weeks of duration.
To Apply by Fax
You can also submit your EIN application through fax. Obtain a copy of form SS-4 from the IRS website, and fax your completed form to (855) 641-6935.
The IRS will send your EIN on the fax number you have provided with the application form. Usually, you will receive the EIN in four business days when you apply through fax.
To Apply on Phone
You can instantly get an EIN by calling the Business and Specialty Tax Line. Dial (800) 829-4933 if you are in the U.S, while international applicants have to dial (267) 941-1099.
Do Self-Employed People Need an EIN?
According to the IRS, self-employed people are considered as sole-proprietors, and they can get an EIN, but it is not required, except for some special cases.
If you are self-employed and even have a single employee, you will require an EIN.
If you perform personal services as a self-employed, you need to provide an EIN, or your client will be required to withhold 28% of your payments. It is recommended to get the help of a professional in this matter.
Many individuals wonder why to get an EIN if it is not required, as they already have a Social Security Number, and can use it when needed. There are two solid reasons to use an EIN over your SSN.
- It Helps Avoid Identity Theft: Taxpayer's identity theft has become a significant problem in recent times. Cyber thieves steal taxpayer's SSNs and use them to file fraudulent tax returns to obtain tax refunds. Hence, it is advisable to keep your SSN as private as possible and instead use an EIN.
- It Helps Establish Independent Contractor status: When you use an EIN on your payments and tax returns, it establishes that you are an independent business person and not an employee. Thus it helps make your profile stronger when you meet prospective clients.
How Long Does it Take to Get an EIN?
Time required to get an EIN mainly depends on the method you have chosen while applying for it.
For instance, you can get an EIN immediately when you apply online by submitting the form SS-4.
If you apply through fax, you will get return fax with the EIN, roughly within a week.
Similarly, if you have applied through the U.S mail, it will take around four to five weeks to get you an EIN.
If in case you don't have an EIN and your return is due, you can write '"Applied for" and the date you have applied for the EIN, in the space shown for the EIN number. Don't make the mistake of writing your SSN in the area provided for the EIN.
Is ITIN and EIN the same?
Most business owners and employees wonder about the differences between ITIN and EIN and get confused between the two.
ITIN (Individual Taxpayer Identification Number) is a tax processing number required by individuals who are not eligible for an SSN (Social Security Number). While an EIN (Employee Identification Number) is a tax processing number required for businesses.
Although both EIN and ITIN are tax processing numbers, they are used in different entities. A business owner who is not eligible for an SSN needs to get an ITIN for filing their individual tax returns, whereas, EIN is solely used for filing business tax returns.
Do You Have to Pay For an EIN Number?
Anybody can get an EIN for free. This is a free service offered by the Internal Revenue Service for the convenience of the taxpayers.
Moreover, there is no renewal required every year, except in some special circumstances.
However, when you take the help of a service agent to apply for an EIN, you will have to pay for their service charge.
These agents can guide you through the overall process and help you gather the documents required while applying for an EIN.
Do you Need EIN For LLC?
Yes, you need an EIN if you have an employee, operate as a corporation, or a partnership firm. All forms of businesses must have an EIN number, including:
- Limited Liability Companies (LLCs)
- Sole Proprietorships
- Non-profit organizations (NPOs)
- Government agencies
- S corporations
- Partnerships
- Estates
- Trusts
In short, you must have an EIN if you file certain tax returns, or withhold taxes from income other than wages.
Conclusion
We hope now you have a clear understanding of how to get an EIN number.
Small businesses require an EIN for tax purposes. All businesses that have employees are required to have an EIN to file their business returns. The businesses that are sole proprietorships with no employees, or single-member LLCs with no employees, don't need an EIN.
Even if the IRS doesn't require you an EIN, most U.S based businesses have the option to apply for it.
Also, getting an EIN has several benefits. This identification number protects you by separating your business and personal finances. Moreover, it lets you apply for business credit, open a bank account, and facilitate working without using your personal Social Security Number.
