If you operate a business, you will need to learn how to get an EIN number to file taxes. Before you take the steps involved in getting an EIN number, we need to define thenumber and show why it is required.
What Is an EIN Number?
According to the Small Business Administration (SBA), an EIN number represents a unique nine-digit tax number that identifies a business for tax purposes. You can liken an Employer Identification Number (EIN) to a Social Security Number (SSN). However, an EIN number is related to filing a business tax return while an SSN is used for personal income taxes. Besides its use for filing taxes, an EIN is required when a company opens a business bank account or applies for business licenses. Another name for an EIN number is a business tax ID.
How to Get a Business Tax ID or EIN Number
Before you apply for an EIN number, it helps to answer some questions about your business. If you can answer “yes” to the following questions, you meet the criteria needed to apply for and get an EIN number.
- Do you have employees? You need an EIN to pay the income taxes for the employees you hire.
- Are you a multi-member limited liability company (LLC)? If so, you need to get an EIN to file taxes.
- Do you operate your business as a corporation or partnership? You cannot do business without an EIN. (Note: If you operate as a sole proprietor and only pay yourself, you don’t necessarily need an EIN. However, you will need the number to open a business bank account.)
- Do you file tax returns for alcohol, tobacco, or firearms, or do you report excise taxes? If so, you will require an EIN.
- Does your company have a Keogh plan? You will need to obtain an EIN.
- Do you have an individual 401(k) plan? Again, you need to get an EIN.
- Have you inherited a business or plan to buy one? If so, an EIN is required.
- Is your business filing bankruptcy?You need an EIN to properly file the paperwork and related taxes.
According to the Internal Revenue Service (IRS), you need to get and EIN number if you engage, as a business, with organizations, such as estates, mortgage investment conduits, farmer cooperatives, non-profits, or plan administrators. Also, if your business is involved with certain trusts, you need to learn more about how to get an EIN number. Exceptions, in this case, include some grantor-owned revocable trusts, exempt organization business tax returns, or IRAs.
Get an EIN Number in One of 4 Ways
EiN applicants can apply online, or by mail, fax, or telephone. If you want to get a business I.D., you have access to any of these methods. When applying for the EIN, you will need your taxpayer identification number in the form of an SSN, ITIN (for foreign individuals), or an EIN.
The tax I.D. number you use to apply pertains to the principal officer, grantor, owner, trustor, or general partner of the organization. The Internal Revenue Service calls these individuals or entitiesthe “responsible party” – a person or entity that is “responsible” for a business’s assets and funds and allocation of the money. Unless the applicant represents a governmental entity, the responsible party must be a person.
Apply for an EIN Online
The quickest and most preferred way to get a business tax I.D. number is to apply for an EIN online. The application can be filled out and confirmed at the same time. When everything has been verified, you can receive the EIN for your business immediately. The online application can be accessed by anyone whose principal business or legal residence is located in the U.S. or a U.S. territory.
International applicants must call a number from 6 a.m. to 11 p.m. (Eastern Time) during the business week to get an EIN number. Only an authorized person can call 267-941-1099 to receive the business tax I.D. and answer questions regarding the application for an EIN. This application is IRS Form SS-4.
You need to complete the Third-Party Designee area of the form and name an authorized individual to answer inquiries about completing the applicationto receive an EIN. A designee’s authority ends when he or she receives the EIN. The signature area of the SS-4 form must be signed to validate the authorization of a designee.
Faxing Your Application
If you choose to apply by fax, you will receive your EIN within 4 business day of submitting your faxed application. You will need to supply your fax number to receive the number. Should you choose to apply by mail, the total processing time is about 4 weeks. Make sure you fill out Form SS-4 completely. You can obtain the fax number or mailing address for the IRS by visiting the IRS website.
Protect Your Identity
While sole proprietors with employees do need to get an EIN, it still is a good idea to apply for one if you are a freelancer or sole proprietor, or a business that does not have to get an EIN. What is great about an EIN is that is separates your personal taxes from your business taxes. Therefore, you can avoid any conflicts along these lines. Therefore, the tax I.D. reduces the risk of identity theft. By having 2 distinct tax I.D.s, such as an SSN and EIN, it makes it harder for a thief to access information about your holdings and earnings.
Get a Business Loan with Less Hassle
Having an EIN also increases your professional credibility and quickens loan funding for your business. Because a large number of lenders require that a business have a business bank account, which cannot be opened without an EIN, you can get a loan with less hassle.
With an EIN, you can establish business credit and easily hire employees, if needed. If you wish to operate a U.S. business from overseas, an EIN also allows you to set up your business more easily. Once you get an EIN, you can use it to apply for loan funding, receive vendor services, or open a business bank account. While an EIN can used throughout the life of a specific business entity, you will still need to apply for a new number if there is change in the structure or ownership of your company.
For example, if you work as a sole proprietor, but decide to establish a multi-member LLC or incorporate, you will need to obtain a new EIN. Maybe you wish to partner with a business colleague and you have been working as a sole proprietor. In this case, you will need to obtain a new EIN to reflect the change. Getting a new EIN only pertains to changes in your business’s structure or ownership. You do not need to get a new EIN if you change the name of your business or move to a new location.