An employer identification number is a unique nine-digit number issued by the IRS. It's similar to a Social Security number but is used to identify organizations or businesses instead of individuals. This ID number allows the IRS to keep accurate records even when an entity moves to a different address, opens a new location or is rebranded with a new name. Unless you are self-employed or a sole proprietor with no employees and no pension fund, you'll likely need an EIN for your business.
TL;DR (Too Long; Didn't Read)
An EIN is an ID number issued to any business that needs to submit documents to the IRS. Self-employed individuals and sole proprietors who meet certain requirements do not need an EIN and can use their Social Security number as an ID number instead.
Which Business Structures Need an EIN?
An EIN helps the IRS identify all entities that submit any type of documentation to them. Perhaps it's a little misleading that the term for this ID number contains the word "employer" because nonprofit organizations need one even if there are no employees on the payroll, and even though it's a federal tax identification number, tax-exempt corporations still need it because they are still required to file annual tax reports.
If you're self-employed or you operate as a sole proprietorship, you can simply file taxes using your Social Security number. You are still welcome to apply for an EIN as a sole proprietor, however. If you decide to incorporate your small business or become a limited liability company, you'll need to get an EIN even if you continue to have no employees.
The IRS offers a quick checklist to help people understand whether their business needs an EIN. For example, if you have employees, file an employment tax return, operate a business as a corporation or partnership, are part of an estate or a nonprofit organization or have a Keogh plan, you'll need an EIN. Be sure to view the second page of Form SS-4 for complete information about who needs an EIN.
Who Can Apply for an EIN?
Note that only a "responsible party" can apply for an EIN on behalf of a business entity. In other words, you need to be someone who controls, manages or directs the organization that will receive the EIN. The responsible party must share his full legal name and SSN on the EIN application and will be registered with the IRS as the person in charge of that corporation or organization. Therefore, a responsible party cannot be a business entity; it must be an individual.
When to Get an EIN
Get an EIN after filing your organization's articles of incorporation at the state level. Once you've received official acknowledgement of your corporation status, you can get an EIN. Receiving an EIN is a relatively straightforward process and is near-instant if the form is submitted online.
It's wise to give yourself plenty of time to apply for and receive an EIN so you don't have any reason to panic at tax time. However, if you apply for an EIN via mail or fax and haven't been issued one by the time a tax deadline looms, the IRS advises writing "applied for" and the date of your application in the EIN space on a tax form.
If you intend to apply for nonprofit or tax-exempt status, you will need to get an EIN before filing the appropriate paperwork. Note that the IRS advises that nonprofit organizations wait until they are officially formed and ready to operate before they obtain an EIN due to potential conflict with the three-year exemption-revocation policy. Nonprofits that fail to file tax reports for three consecutive years will automatically have their tax-exempt status revoked, and the three-year mark begins when the EIN is issued.
How to Receive an EIN
Receiving an EIN is as easy as filling out a one-page online application and submitting it to the IRS. You can complete the form online, which is particularly convenient because you will automatically receive your EIN upon completion. Apply when you have time to focus on completing the application because the online application won't save changes and will time out after 15 minutes.
However, if you would rather use pen and paper, you can print the PDF version of the EIN application, Form SS-4, and submit it via mail or fax. Allow for a processing time of four to five weeks when submitting a paper form.
Note that the only way for applicants outside the U.S. to obtain an EIN is over the phone.
How to Look Up Your EIN
Once you've received your EIN, store it somewhere for easy reference. However, life happens, and sometimes important numbers get lost or misplaced. Fortunately, there are several different ways you can look up your EIN online, over the phone or in print. First, you can check your email for the electronic confirmation of your EIN application and receipt.
If you've previously filed taxes using your EIN, simply look up the previous year's tax forms and look for the space on the first page where the EIN is entered. You can also call any bank or state agency with which you opened an account or applied for a license using your EIN. Finally, you can call the IRS Business and Specialty Tax Line for the EIN as long as you can verify that you are an authorized party (such as a sole proprietor, partner, executor, trustee or corporate officer, etc.).
One of these four methods should allow you to recover your EIN. Contact the IRS for additional assistance if you are still unable to recover your unique nine-digit number. New EINs are administered only under particular circumstances.
Getting a New EIN
The IRS has many rules in place about when a business does or does not need a new EIN. If your business structure changes, for example, or you file bankruptcy as a sole proprietor, a new EIN is needed. Changing the name or address of your business, opening new locations for the same business and declaring bankruptcy as a partnership or corporation are not legitimate grounds for needing a new EIN.
Once you've determined that you do need a new EIN, obtaining it is as simple as filing Form SS-4 again in your preferred method: online or in print. There is no special procedure for obtaining a new EIN versus receiving one for the first time.
Canceling Your EIN
If your business venture fails, you may wish to cancel your EIN. However, the IRS keeps a record of all federal tax identification numbers for historical purposes and never cancels or reuses them. If there is a concern about your defunct business's previous tax reports, for example, the IRS can easily find those records thanks to your EIN. Also, if you choose to restart your business with the same structure, the same EIN could be used.
Therefore, instead of canceling the EIN, the IRS can help you close down your business account. You'll need to pay all outstanding taxes before the account can be officially closed.
Who Needs to Know Your EIN
It's possible for an EIN to be stolen and used for identity theft or tax-fraud purposes, so it's important to take reasonable measures to keep your EIN secure just like you do with your Social Security number. Don't broadcast it to the public on your website, for example.
However, there are instances in which you will need to share your EIN. In particular, your employees will need to list it on their income tax returns. An EIN may also be used to open a business bank account or apply for state or local business licenses.
- IRS: Frequently Asked Questions - Form SS-4 & Employer Identification Number (EIN)
- IRS: Responsible Parties and Nominees
- IRS: Do You Need an EIN?
- IRS: Instructions for Form SS-4
- IRS: Form SS-4
- IRS: Lost or Misplaced Your EIN?
- IRS: Apply for an Employer Identification Number (EIN) Online
- IRS: Do You Need a New EIN?
- IRS: Cancelling an EIN - Closing Your Account