An Employer Identification Number, or EIN, is a unique number that the IRS issues to businesses for tax purposes.
An Employer Identification Number is also referred to as a Federal Tax ID or Federal Identification Number. The IRS issues these nine-digit identifiers to U.S. businesses to use for filing taxes.
Any company with one or more employees needs an EIN. Small businesses without employees sometimes need them as well.
One reason you might need an EIN, even if you don’t have employees, is if you operate as an LLC. If you file tax returns related to employment or alcohol, tobacco and firearms, you’ll need one. And if your business is a non-profit organization, you need an EIN. The IRS has more information you can reference on who needs an EIN.
While sole proprietors don’t usually need an EIN, some choose to register for one. They can then use it instead of their Social Security number for privacy or security reasons.
One of the primary purposes of an EIN is so the IRS can identify a business for tax purposes. If you’re a business owner or file taxes for a business, you’ll use your EIN when you file. You also use it when you deposit employment taxes. These taxes include employee social security and Medicare.
Other reasons you might need an EIN are to apply for a business license or open a business bank account.
Credit card processors usually require an EIN when you apply.
It’s free to request an EIN from the IRS. You can apply for one by phone (for international applicants), fax, or mail. There’s also an option to apply for an EIN online. The online form is accessible Monday to Friday from 7 a.m. to 10 p.m. Eastern time.
The application process includes filling out Form SS-4, Application for Employer Identification Number. Page two of the form can help you confirm that you do need an EIN. If you do, the instructions on this page will tell you what lines to complete on the first page.
Jane has a business selling handmade goods online. She has registered as a sole proprietor, so she doesn’t have an EIN. Instead, she uses her Social Security number to file her business taxes.
Because Jane’s business is doing so well, she decides to hire an employee to help with shipping orders. While a sole proprietor can have employees, Jane decides to file for an LLC. She also learns that she will need to apply for an EIN.
Jane requests an EIN using the IRS’s online form. After entering all of her information and submitting the form, Jane immediately receives her EIN. The EIN is in the following format: 00-000000000. The first two digits are a prefix identifying that the IRS issued the number online.
While applying for her EIN, Jane indicates that she has one employee. As a result, Jane is automatically enrolled in the Electronic Federal Tax Payment System (EFTPS). She can now make online deposits for her employment taxes for free.
Jane will also use her EIN to file her business taxes throughout the year.« Back to Glossary Index
Sed ut ullamcorper nulla, eu consequat turpis. Duis ac molestie orci. Suspendisse blandit ullamcorper erosCTA Button