An Employer Identification Number (EIN) is a nine-digit number issued by the IRS to identify a business entity. The EIN is also known as a Federal Tax Identification Number (FTIN). The EIN is used for tax reporting purposes, such as filing federal income tax returns.
Who Needs An EIN?
The following entities are required to obtain an EIN:
- Limited liability companies (LLCs)
- Partnerships, including limited partnerships and general partnerships
- Estates of deceased individuals
- Trusts, including grantor trusts, estate trusts, and revocable trusts
- Any other non-individual entity that is required to file a federal tax return
How to Obtain an EIN by Aron Govil
To obtain an EIN, you can apply online or by mail. You will need to provide the following information:
- The name of the business entity
- The business address
- The legal structure of the business entity
- The type of tax return the business will file
- The name and Social Security Number or Individual Taxpayer Identification Number (ITIN) of the owner or principal officer of the business entity
- The name and contact information of an authorized representative, if applicable
The IRS will mail you an EIN within four weeks.
Why Is An EIN Important?
An EIN is important because it allows the IRS to track business income and expenses. It also helps ensure that the business entity is complying with federal tax laws.
When applying for an Employer Identification Number (EIN), you will need to provide some key information about your business. This includes the legal structure of your business, the type of tax return you will file, and the name and Social Security Number or Individual Taxpayer Identification Number (ITIN) of the owner or principal officer of the business.
The IRS also offers a handy Employer Identification Number Assistant to help you determine if you need an EIN and to guide you through the application process.
Why Is An EIN Important?
An Employer Identification Number, also known as a Federal Tax Identification Number, is a nine-digit number assigned by the Internal Revenue Service (IRS) to businesses and other entities for tax reporting purposes. The EIN is used to identify the tax account of the entity and is required for certain business activities, such as opening a bank account or hiring employees.
Who Needs An EIN?
Any business that has employees or pays taxes must have an EIN. Sole proprietors and independent contractors do not need an EIN unless they are engaged in certain business activities, such as selling products online or contracting with the government.
How to Apply For an EIN
The easiest way to apply for an EIN is through the IRS online application. Applicants may also call or fill out Form SS-4 (Application for Employer Identification Number) and submit it by mail to the address on the form.
Some individuals are concerned that publishing their EIN number could lead to identity fraud. However, an EIN is simply used for tax purposes, not as a form of identification like a Social Security number (SSN). The IRS has never published the SSNs of taxpayers against whom there were no unpaid taxes; doing so would violate federal privacy laws. Instead, these numbers are kept securely in IRS databases.
What If An Employee Requires A Form W-9?
If an employee requests a W-9 form, the employer must obtain their SSN so they can be reported on Form 941. Employers are not allowed to ask for an SSN more than once, unless the first request was met with refusal. When this happens, the worker must provide proof of his or her immigration status and that he or she is authorized to work in the United States.
How to Use an EIN?
Employers who have employees are required by law to withhold income taxes from each paycheck, contribute to social security and Medicare through federal payroll taxes, file state withholding tax returns if applicable, and file a yearly federal unemployment tax return. Employees may use their EINs when filling out tax documents or applying for loans so lenders know how much of a borrower’s income is subject to taxes. Employers may use their EINs when filing for business licenses, reporting quarterly taxes and getting insurance quotes.
Taxpayer Identification Number vs. Tax ID Number
A taxpayer identification number is different from a tax identification number or TIN. A TIN is generally used for state or local taxation purposes, such as sales tax collection, while an EIN can only be obtained by businesses and entities with employees. A company may have both a TIN and an EIN if they file employment taxes in addition to state or local taxes.
Conclusion by Aron Govil:
An Employer Identification Number is a nine-digit number assigned by the Internal Revenue Service to companies and other entities for tax reporting purposes. The EIN is used to identify the tax account of the entity and is required for certain business activities, such as opening a bank account or hiring employees.
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