Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique identification number assigned to a business entity so that the business entity can easily identify with the Internal Revenue Service. 1It is often used by employers to file taxes.
The EIN is also known as the Federal Tax Identification Number. When it is used for tax purposes to identify a company, it is often referred to as a Tax Identification Number (TIN).
KEY TAKEAWAYS
- An Employer Identification Number is a unique number assigned to a business so that it can be easily identified by the IRS.
- Filing for one is free, the application is available on the IRS website and can be easily filled out and submitted electronically.
- Businesses must be located in the United States or a U.S. territory to apply for an EIN online.
Understanding the Employer Identification Number (EIN)
Just like a Social Security Number (SSN) is used to identify a US resident individual, an EIN is used to identify a business entity in the country. An EIN is a unique nine-digit number issued by the Internal Revenue Service that includes information on which state a company is registered in.3
Unlike SSNs, EINs are not considered sensitive information and are freely distributed by many businesses through publications and the Internet.
The number format of EIN is as follows: XX-XXXXXXX. The IRS uses EINs to identify taxpayers who need to file various business tax returns.3
Business entities wishing to operate in the United States must apply for an EIN by phone, online, fax, or mail. All forms of businesses can apply for and issue EINs such as LLCs, Sole Proprietorships, Nonprofits, Government Agencies, S Corporations In addition, the IRS does not favor the size of the company, as companies with only one employee are associated with multinational corporations are also eligible for an EIN.4
How to get EIN
There is no fee to apply for an EIN, and the application form available on the IRS website can be easily filled out and submitted electronically. An EIN is assigned as soon as the online information is verified. Businesses must be located in the United States or a U.S. territory to apply for an EIN online.5
Businesses need an EIN to pay employees and file business tax returns. Also, banks, credit unions, and brokerages won’t open accounts for companies that don’t have an EIN. Self-employed workers such as subcontractors are usually required to have an EIN, which the main contractor will use to report to the IRS all business income paid to subcontractors.
Employer identification numbers are unique to the business they are assigned to. The numbers will never expire and the same set of numbers will never be reissued to another business, even if the original employer goes out of business.
Special attention items
Businesses that change their ownership structure usually have to apply for a new EIN. 6 For example, sole proprietorships planning to combine businesses must apply for a new EIN. 7 Depending on the nature of a particular taxpayer, the EIN may or may not be the taxpayer identification number used by the IRS. For sole proprietorships, the taxpayer identification number is its social security number or employer identification number. For corporations, partnerships, trusts, and real estate, this number is EIN.2
What is a Taxpayer Identification Number (TIN)?
The taxpayer identification number is a 9-digit identifier. While most individuals can use a Social Security number, most businesses require a taxpayer identification number issued by the Internal Revenue Service.
Form W-9: Taxpayer Identification Number (TIN) and Certification Request
Form W-9 is an IRS form used to confirm an individual’s Taxpayer Identification Number (TIN).
Subcontract
Subcontracting is the practice of assigning some of the obligations and tasks under a contract to another party (called a subcontractor).
What is a Tax Identification Number (TIN)?
A tax identification number is a tracking number used by the IRS for tax purposes and is required information on all tax returns.
