EIN is an abbreviation for Employer Identification Number. Every business entity has to be assigned an EIN. This is partly to easily recognize the business by the IRS or Internal Revenue Services. This EIN is typically used in matters of filing or reporting taxes. The business has to apply for the EIN from the IRS initially, and it can be very easily acquired.
The usage of EINs is common in the United States of America. The other name for EIN in the states is Federal Tax Identification Number. The EIN is a unique 9-digit number that carries information about the state in which the company or business has been registered. These numbers are used for filing various business tax returns by identifying taxpayers.
The EIN applies to any business organization, corporation, partnership, or employee working under the company. It is also necessary for filing individual tax returns. There are a few mediums through which businesses can apply for an EIN. First, they can apply online through faxes, emails, and phones.
Estates, Government agencies, Limited liability companies (LLCs), Non-Profit organizations (NPOs), Partnerships, S Corporations, and Trusts are eligible for the EIN. The IRS has a size bias toward the registration of business entities. Small businesses to multinational corporations all hold equal rights to apply for an EIN.
Employer Identification Number Application Process
No charges are added to the application of an EIN from a business entity. Since there is nothing to pay, businesses can be interested in the deal. On top of it, as we have mentioned earlier in this article, the application can be made by fax, mail, online, or phone.
The process initiates with filling up Form SS-4: Application. The Employer Identification Number form is available with the IRS or on their website. The form will contain a certain portion where you have to include specific information. The following information may be important in this scenario.
- The business has to clarify the type which they might fall under properly. Their area of work and expertise.
- While they are at it, they must also state a good enough reason for their application. The reasons could range from a change of organization, the start of a new business, or IRS withholding record compliance.
- The business has to state a starting or acquisition date.
- It also requires proof of the principal industry of business.
Businesses can only acquire the application for the EIN in the US. However, after the verification process, the number will be assigned instantly.
How The Employer Identification Number Can Benefits Business Entities?
The EIN is assigned as an identification number, and every business gets issued only one set, which will not be repeated in other cases. This number never expires, and even after the employer is out of business, the EIN number is not reactivated. The number is crucial for every business to be able to operate. The EIN is needed in many things when you start your business. Some of the reasons to get an EIN are noted below.
- A business needs employees to perform tasks at a greater speed. And, to hire employees and pay them remuneration, you will need the EIN.
- The EIN is also crucial in investing surplus cash, opening a business account with the bank, and obtaining credit.
- It is also required in maintaining corporate shields.
- Filing for business taxes, coupled with the registration for the state taxes.
You can also have separate accounts for business and personal usage. Personal information remains protected, and the business expenses do not clash with your finances if you can keep them separate. Subcontractors or other self-employed individuals will certainly require the EIN. Primary contractors will use this number for registering business income paid to subcontractors with the IRS.
When Is The Right Time To Get An EIN Number?
As mentioned earlier, the IRS needs only certain business entities to get an EIN. However, there are certain reasons why the company needs the EIN. Here are a few examples of EIN usage.
- Any company with employees working under them will require an EIN, even if they have only one employee.
- EIN is required for a business that operates as an organization or a corporation.
- Tax returns for excise, alcohol, tobacco, employment and firearms require the EIN.
- Income paid to non-resident aliens will require withholding of taxes. This can only be applied with an EIN.
- You will also need an EIN to have a Keogh Plan.
- When the business is involved with several organizations coming from different backgrounds will need an EIN. However, this does not apply to estates, non-profits, and trusts.
The EIN is crucial to a business for several reasons. First, almost every business needs an EIN to do certain things, such as filing tax returns. The IRS assigns the EIN to every business for identification, which can be acquired easily and without any cost.