Employer Identification Number (EIN) or Federal Employer Identification Number (FEIN) is a Tax ID number issued by the IRS in the US. It is a unique, 9-digit number given to business entities, just like SSN is given to individuals.
Understanding EIN in detail
As conveyed by the IRS, EIN is mandatory for some, while it is optional for other businesses. Yet, it is suggested to have an EIN to keep yourself away from identity theft. It also comes in handy when keeping personal information separate from professional details. An EIN, also known as Federal Tax Identification Number (FTIN), can be applied by the business’s owner or general partner/manager.
IRS basically uses an EIN to identify the business and its processes. The companies can issue the EIN directly from the IRS website for free and on a quick turnaround. But before knowing how to apply for EIN, it is essential to know who needs an EIN and why.
When do you need it?
Let us help you in understating the need for Employer Identification Number by explaining when you need it.
As explained that EIN is a Tax ID number required by businesses, it is needed during the tax filing process by the business entities. Without it, the IRS can reject the tax return requests and put penalties on the business.
An Employer Identification Number is needed, if:
- You have a corporation
- You have to hire employees
- You have a partnership firm
- You have to file certain tax returns
- You have to withhold taxes
Business Criteria for EIN eligibility
There are several specifications about the businesses which can apply for EIN. However, the mandatory categories which can help you to define whether you need it or not are as follows:
- If you don’t have employees but are planning to hire within the next 12 months
- If you have a Keogh plan, also known as a solo 401(k) retirement plan
- If you are in an industry where federal excise taxes are mandatory
- If your business has run into bankruptcy
- If you are operating a business
It doesn’t matter whether you are a US citizen or not; if you are operating in the US market, you need an Employer Identification Number.
For many businesses, filing for an EIN is mandatory even if they do not meet the above-mentioned requirements. And because it is free to apply for an Employer Identification Number, the IRS suggests every business have it. You might need the EIN anyway while opening a business bank account.
How to apply for EIN or FEIN?
The Internal Revenue Service has made it possible for all by keeping the process of applying for Employer Identification Number easy and free. The applicants need to fill the Form SS-4, which is available on the IRS website. The US citizens can apply for it by phone but for non-US citizens, options like fax, mail, and online are also available.
Moreover, one doesn’t need special or specific knowledge to fill the application. It just requires you to fill out some information, such as:
- Name of the person responsible for the business (usually the business owner)
- The person’s SSN, ITIN, or prior EIN (if any)
- Business or Company’s name
- Email ID and the mailing address of the business
- Type of business entity – sole proprietorship, partnership, corporation, trust, or so on
- Industry type – eCommerce, construction, LLC, manufacturing, etc.
- Reason to get EIN
- The acquisition date or the date when the business will start processing
- The number of employees or expected number of employees within the next 12 months
- The expected date of initiating the wage payments
Once the required information has been filled in and submitted, the acceptance will be given soon.
NOTE: Please know that the principal business must be located within the territory of the USA in order to be eligible for EIN.
In case of confusion or direct understanding of the application process, you can check the IRS website for the same. They have it all mentioned clearly and concisely for all to understand.
Remember that the filing of EIN is free from the IRS end. However, if you take assistance from a third party to provide the services, they can charge you for the services offered.