An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. Think of it as a Social Security number for your business. Just as individuals use their SSN for tax purposes, businesses use their EIN to identify themselves to the IRS. This number is crucial for tax administration and business operations, allowing the IRS to easily identify and track business entities for tax compliance. Obtaining an EIN is a free service offered by the IRS.
Who Needs an EIN? Do You Need One for Your Business?
Determining whether your business requires an EIN is a critical first step in ensuring tax compliance. While not every business structure necessitates an EIN, many do. You are legally required to obtain an EIN if your business meets any of the following criteria:
- Employing Workers: If you hire employees, you absolutely need an EIN. This is because you’ll be responsible for withholding and remitting payroll taxes, and the EIN is essential for reporting these employment taxes to the IRS.
- Operating as a Corporation or Partnership: Most corporations, whether they are S corporations or C corporations, and partnerships, including limited liability partnerships (LLPs) and general partnerships, are required to have an EIN. These business structures are generally considered separate legal entities from their owners and thus need their own tax ID.
- Filing Specific Types of Taxes: If your business needs to pay excise taxes (taxes on specific goods or activities), or taxes related to alcohol, tobacco, and firearms, you will need an EIN to fulfill these tax obligations.
- Withholding Taxes for Non-Resident Aliens: If your business pays income (other than wages) to non-resident aliens and is required to withhold taxes on this income, an EIN is necessary.
- Operating Certain Types of Entities: Specific entity types are mandated to have an EIN for operational purposes. These include:
- Trusts, except grantor-type trusts
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
Even if your business doesn’t strictly meet the mandatory requirements for a federal EIN, you might still want to get one. For instance, banks often require an EIN to open a business bank account, and some states may require it for state tax purposes or to obtain certain business licenses. It’s important to note that EINs are specifically for federal tax purposes and should not be used for activities like state tax lien auctions or lotteries.
For a more detailed understanding of EIN requirements, the IRS Publication 1635, “Understanding Your EIN,” is a valuable resource.
Before You Apply for an EIN: Essential Pre-Application Steps
Before you start the EIN application process, there are a couple of crucial steps to take to ensure a smooth and correct application.
1. Form Your Legal Entity First: If you are establishing a formal legal entity like a Limited Liability Company (LLC), partnership, or corporation, it’s imperative to first complete the entity formation process with your state. This means officially registering your business with the relevant state authorities according to the specific requirements of your chosen business structure. This step is also applicable to tax-exempt organizations; legal formation must precede EIN application.
2. Special Note for Tax-Exempt Organizations: Non-profit organizations seeking tax-exempt status need to be particularly mindful. Do not apply for an EIN until your organization is legally formed. It’s crucial to be aware that most tax-exempt organizations face automatic revocation of their tax-exempt status if they fail to file required returns or notices for three consecutive years. However, some exceptions exist regarding this automatic revocation, so it’s advisable to consult IRS guidelines for specific cases.
3. Political Organizations and EINs: Political organizations have a unique requirement. They must file Form 8871, “Political Organization Notice of Section 527 Status,” within 24 hours of their creation. Until this form is filed, a political organization is not considered tax-exempt. Crucially, an EIN is required to file Form 8871. Therefore, for political organizations, obtaining an EIN is an immediate and necessary step right after formation.
How to Apply for an EIN: Methods and Options
For businesses with their principal place of business located within the United States, the IRS offers several convenient methods to apply for an EIN:
- Online Application: The IRS provides an online EIN application portal which is the quickest and most efficient method. Applying online allows you to receive your EIN immediately upon successful submission. The online service is available at no cost directly from the IRS website.
- Application by Fax: You can complete Form SS-4, “Application for Employer Identification Number,” and fax it to the IRS at 855-641-6935. If you choose to apply by fax, you can expect to receive your EIN within approximately four business days.
- Application by Mail: Another option is to mail your completed Form SS-4 to the Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999. However, applying by mail is the slowest method, and it may take about four weeks to receive your EIN through this process.
Applying for an EIN from Outside the U.S.
For businesses whose principal operations are located outside of the United States, the EIN application process is slightly different:
- Phone Application: International applicants can apply for an EIN by phone by calling the IRS at 267-941-1099. This phone line is available Monday through Friday, from 6 a.m. to 11 p.m. Eastern Time.
- Application by Fax (International Fax Number): You can also submit Form SS-4 via fax. For applications from outside the U.S., use the international fax number: 304-707-9471. For faxing from within the U.S., the number is 855-215-1627.
- Application by Mail (International Address): If applying by mail from outside the U.S., send Form SS-4 to Internal Revenue Service, Attn: EIN International Operation, Cincinnati, OH 45999.
Important Limitation: Regardless of the application method, the IRS only allows one EIN application per responsible party per day. This limitation applies across all application channels (online, phone, mail, or fax).
The Role of the Responsible Party in EIN Applications
When applying for an EIN, a crucial element is identifying the responsible party. This individual is defined by the IRS as the person who ultimately controls, manages, or directs the applicant entity and the disposition of its funds and assets. Essentially, the responsible party is the key person in charge of the business entity.
The EIN application mandates specific information about the responsible party, including:
- Name: The legal name of the responsible party.
- Taxpayer Identification Number: This can be the responsible party’s Social Security Number (SSN) if they are an individual, an Individual Taxpayer Identification Number (ITIN) if they are a non-resident alien, or an Employer Identification Number (EIN) if the responsible party is another business entity.
- Signature: The responsible party is required to sign the EIN application, attesting to the accuracy of the information provided.
Important Note on Nominees: It is critical to understand that nominees are not authorized to apply for an EIN. A nominee is someone who is designated to act on behalf of another but does not have the actual authority or control over the entity. Allowing a nominee to apply for an EIN can pose significant risks to the entity’s information and privacy. The IRS requires the application to be completed by the actual responsible party who has direct control and oversight of the business.
When Can You Start Using Your EIN?
Once you receive your EIN from the IRS, you can generally begin using it for most business operational needs almost immediately. Common uses of your EIN right away include:
- Opening a Business Bank Account: Banks require an EIN to open accounts for businesses, as it serves as the business’s tax identification for financial transactions.
- Applying for Business Licenses and Permits: Many federal, state, and local government agencies require an EIN for businesses to obtain the necessary licenses and permits to operate legally.
- Filing Tax Returns by Mail: If you need to file a tax return via mail, you will use your EIN to identify your business on the tax forms.
However, there are certain IRS systems that require a processing period to update with your new EIN. It’s advisable to wait up to two weeks before attempting the following actions:
- Passing the IRS Taxpayer Identification Number (TIN) Matching Program: This program is used by payers to verify payee TIN information with IRS records. Your EIN needs to be fully processed in the IRS system to successfully pass this verification.
- E-filing Tax Returns: While you can use your EIN immediately for paper filing, allow up to two weeks before attempting to electronically file (e-file) tax returns. The IRS systems need time to synchronize for e-filing purposes.
- Making Tax Deposits and Electronic Payments: To make federal tax deposits and payments electronically through systems like the Electronic Federal Tax Payment System (EFTPS), it’s recommended to wait for approximately two weeks after receiving your EIN. Refer to IRS Publication 15, Circular E, Employer’s Tax Guide and Publication 4275, EFTPS Express Enrollment for New Businesses for more detailed guidance on electronic tax payments.
What to Do If You Are Still Waiting for Your EIN
In situations where a tax return due date approaches and you have applied for an EIN but haven’t received it yet, the IRS provides a contingency. On your tax return form, in the space designated for the EIN, you should write “Applied For” and clearly note the date on which you submitted your EIN application. This informs the IRS that you have initiated the process of obtaining an EIN.
Similarly, if a tax deposit is due before you receive your EIN, you should still make the tax payment on time. Send your payment to the designated IRS service center address for your state. Ensure your check or money order is made payable to the Internal Revenue Service and clearly includes the following information:
- Your business name (exactly as it appears on Form SS-4)
- Your business address
- The type of tax you are paying (e.g., payroll tax, excise tax)
- The tax period the payment covers
- The date you applied for your EIN
Providing this information ensures that the IRS can correctly process your payment even without the EIN being immediately available.
When is a New EIN Required? Scenarios for Obtaining a New Number
Generally, you are required to obtain a new EIN when there are significant changes to your business’s ownership or its legal structure. The most common scenarios that necessitate a new EIN include:
- Change in Business Structure: If you change your business structure, for example, from a sole proprietorship to a corporation, or from a partnership to an LLC (in some cases, depending on state law and specific structural changes), you will likely need a new EIN. Each business structure is considered a distinct legal and tax entity.
- Change in Ownership (for certain entity types): In partnerships, if a partnership terminates and a new partnership is formed, a new EIN is typically required. Similarly, if a corporation undergoes a significant change in ownership that results in a new legal entity, a new EIN might be necessary.
It’s important to note that certain changes do not require you to obtain a new EIN. These include:
- Changing Your Business Name: A simple change in your business’s operating name does not necessitate a new EIN. You can notify the IRS of a name change without needing a new tax ID.
- Changing Your Business Address: Moving your business location, even to a different state, does not require a new EIN.
- Changing the Responsible Party: If the responsible party for your business changes, you do not need to apply for a new EIN. You would, however, need to update the responsible party information with the IRS.
For detailed guidance on specific situations and whether a new EIN is needed, the IRS provides resources on “when to get a new EIN.”
Deactivating an EIN: When You No Longer Need Your Number
If you cease operating your business and no longer require your EIN, the IRS does not technically “cancel” an EIN. Instead, they can deactivate it. Deactivation essentially flags the EIN in the IRS system as no longer active, preventing it from being used for future tax filings or business operations.
To deactivate your EIN, you typically need to send a written notification to the IRS. This notification should include:
- Your complete legal business name
- Your EIN
- Your business address
- The reason you wish to deactivate the EIN (e.g., business closure, entity liquidation)
- Date you ceased business operations
Send this written notification to the Internal Revenue Service address where you filed your returns.
Recovering a Lost or Forgotten EIN
Losing or forgetting your EIN is a common concern for business owners. Fortunately, there are several ways to retrieve your missing EIN:
- Check Your EIN Application Notice: When you initially applied for your EIN, the IRS would have sent you a notice confirming your EIN assignment. Search your business records for this notice.
- Contact Your Bank: If you opened a business bank account using your EIN, your bank will have this number on file. Contact your bank and inquire about your EIN.
- Review State or Local License Applications: If you applied for state or local business licenses or permits, these applications often require you to provide your EIN. Check your records of these applications.
- Examine Past Tax Returns: Your EIN will be printed on all previously filed business tax returns. Reviewing copies of your past tax returns is often the quickest way to find your EIN.
If you are unable to locate your EIN using these methods, you can call the IRS Business and Specialty Tax Line at 800-829-4933. The IRS will verify your identity and business information before providing your EIN over the phone, but only if you are authorized to receive it (typically the responsible party or an authorized representative). The phone line is available Monday to Friday, 7 a.m. to 7 p.m. ET.
Handling Multiple EINs or Entities
A business entity should generally have only one EIN. Having multiple EINs can lead to confusion and potential issues with tax reporting and compliance.
If you find that your business has been assigned or has obtained more than one EIN and you are unsure which one to use, it is crucial to contact the IRS Business and Specialty Tax Line at 800-829-4933 (TTY 800-829-4059). The IRS can help you determine which EIN is the correct one for your business to use going forward.
In the specific situation where you have taken over another employer’s existing business, it’s critical to use your own EIN to report and deposit employment taxes. Do not use the EIN of the previous business owner or employer. Refer to IRS Publication 15, Circular E, Employer’s Tax Guide for detailed guidance on employer responsibilities when taking over a business.
Addressing an EIN You Didn’t Request
Receiving an EIN that you did not apply for can be a sign of potential identity theft or fraud. If you receive an EIN confirmation notice from the IRS for a business you did not create or authorize, it is essential to take immediate action.
The IRS provides specific guidance on what to do if you receive an EIN you didn’t request. You should also be vigilant about potential tax scams and fraud. If you believe someone has stolen your EIN or used it fraudulently, report it to the IRS immediately.
Resolving Issues with a Retirement Trust EIN
In certain cases, you might encounter a situation where a retirement trust EIN becomes deactivated or doesn’t function as expected. If you experience issues with a retirement trust EIN, it’s possible to have it re-established.
To re-establish a deactivated retirement trust EIN, you need to send specific information to the IRS, including:
- The EIN in question
- The name of the trust
- The address and contact information for the sponsor or trustee of the trust
This information can be sent to the IRS via:
- Fax: 855-214-7520
- Mail: Internal Revenue Service, Attn. EP Entity, M/S 6273, Ogden, UT 84201
- Delivery Service: Internal Revenue Service, 1973 N Rulon White Blvd., Attn. EP Entity, M/S 6273, Ogden, UT 84404
Beneficial Ownership Information Reporting to FinCEN
It’s important for businesses to be aware of potential new reporting requirements related to beneficial ownership information. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has implemented rules requiring certain types of companies, including corporations, LLCs, and similar entities, to report information about their beneficial owners—the individuals who ultimately own or control the company.
This beneficial ownership information reporting to FinCEN began on January 1, 2024. If your company is required to report, the initial reporting deadline is based on when your company was created or registered.
For comprehensive information on beneficial ownership reporting requirements, including whether your company is required to report, who qualifies as a beneficial owner, and reporting deadlines, please consult the FinCEN website directly. The IRS cannot provide answers to FinCEN-related questions; direct your inquiries to FinCEN for accurate and up-to-date information.
