Employer Identification Number (EIN)

What is Employer Identification Number (EIN)?

A firm, nonprofit organization, or trust will receive an Employer Identification Number (EIN), which is a special identification number. It is provided by the IRS and is used for license applications, tax reporting, and other validations. Even if the company is no longer in operation, this number is issued once for all time and cannot be renewed.

Due to the fact that corporations and businesses utilize it for tax purposes, It is also referred to as the Federal Tax Identification Number and Tax Identification Number. 

It has nine digits in the format xx-xxxxxxx. Businesses input their EIN number when prompted for a Taxpayer Identification number in a manner similar to how individuals use their Social Security Number (SSN) for tax-related functions.

Are Employer Identification Numbers Required?

An EIN is required for companies that operate as partnerships or corporations. The SSN of the owner may be used by sole proprietorships without workers or single-member limited liability companies (LLC). As a result, it will be necessary to open a business checking account, join brokerage firms and credit unions, or apply for company licenses. The company would require an EIN if it filed tax returns for excise, employment, alcohol, tobacco, or guns, or if it had a Keogh plan. Foreign businesses that must submit US tax returns must also obtain an EIN.

Self-employed people also require an EIN, which the primary contractor will utilize to report the business income sent to the person.

How Can You Obtain an Employer Identification Number?

Applying for an EIN is fairly simple. It is free to apply for it immediately from the IRS website, over the phone, or by fax. When applying for it, you must have the following information available:

• Name of the company legally
• ID number and name of the accountable party.
• Type of enterprise
• Motivation for applying
• Date the firm began or was acquired.
• The highest anticipated number of workers every year.

Conclusion

Businesses must apply for a new number if they alter their legal form or ownership, such as going from a sole proprietorship to an incorporation. If you are only altering the business's name or location, this might not be necessary.

All types of businesses, including NGOs, government organizations, Limited Liability Companies (LLC), and many more, are eligible to apply for an EIN.

The Employer Identification Number can be shared for commercial purposes online and even in print publications because it is not as private as the Social Security Number.

It is fairly simple to apply for an EIN; you may access the applications online on the IRS website. EIN is utilized not only for tax reporting but also for creating bank accounts and applying for credit.