An “EIN” is an Employer Identification Number, also known as a “Federal Employer Identification Number,” (“FEIN”), or a “Tax Identification Number” (“TIN”). In the United States, an EIN is the business and corporate equivalent to the Social Security number. EINs are issued to any person, business, or other entity that pays employee withholding taxes. To explore this concept, consider the following EIN definition.
Definition of EIN
- Employer Identification Number used to identify a business entity for tax purposes.
What is an EIN
The Internal Revenue Service issues EINs to identify business entities operating within the United States for tax purposes. Each EIN is a unique nine-digit number, similar to a Social Security number (“SSN”), though the format in which the digits are written is different:
SSN: XXX – XX – XXXX
EIN: XX – XXXXXX
EINs are issued to sole proprietors, partnerships, corporations, and other business entities, as well as non-profit organizations, trusts, and governmental agencies, for use in a number of purposes related to taxes. Individuals who are self-employed, with no employees, may choose whether to use their SSN, or an EIN for their business taxes.
Who Needs an EIN
Many people find the topic of tax identification numbers to be confusing, especially when starting a new business. If any of the following conditions are true, an EIN number is required:
- The business has any employees
- The business is operated as a partnership or corporation
- The business is required to file employment, alcohol, tobacco, firearm, or excise, tax returns
- The business or individual withholds taxes on income, other than wages, for a non-resident alien
- The business or individual has a Keogh plan
In addition, the following entities require an EIN:
- Trusts, except certain grantor-owned revocable trusts
- Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
Purposes of an EIN
There are many reasons why it is important for a business entity to apply for and receive an EIN. The main purpose is for the Internal Revenue Service to identify the business or entity for tax purposes, and to track taxes paid and due by the entity. An EIN is required for some business purposes and transactions, and it can come in handy for others. Some of the most common purposes of an EIN include:
- Opening a business bank account
- Applying for a state or local business license
- Filing federal income tax forms and any federal payroll or employment tax forms
- Filing income taxes electronically using the federal tax filing system (“EFTPS”)
- Filing and payment of state sales tax and state income taxes
How to Apply for EIN
The Internal Revenue Service makes applying for an EIN quite easy, w during the session. This online application process is available for ith an online application process that evaluates the information provided, and issues the EIN immediately all entities located within the United States, and it is a free service. The IRS recommends caution in dealing with any third party offering to provide an EIN in exchange for a fee. Not only is the issuance of these numbers free of charge, but it requires the provision of certain identifying information.
When visiting the IRS EIN online application site, the business’ owner, general partner, principal officer, or trustee must provide identifying information for the entity, as well as a TIN or SSN. This allows the IRS to track business owners and principals with their related businesses and entities.
Applicants may also apply for EIN number by fax, by filing a Form SS-4. After filling out the form completely, it should be faxed to the IRS at: (859) 669-5987 (current as of October 2015). Form SS-4 includes instructions as well as the current fax number. When filing by fax, the taxpayer usually receives the EIN within a few business days.
Form SS-4 can also be mailed if desired, though the processing time is significantly longer than that of a fax or online application. The form should be mailed to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Businesses and entities operating outside the United States may apply for an EIN by phone by calling:
1+267-941-1099 (not a toll free number)
between the hours of 6:00 a.m. to 11:00 p.m., Eastern time, Monday through Friday. The individual making the phone call to the IRS must be authorized by the entity to apply for and receive the EIN, and must be able to answer questions related Form SS-4.
Cancelling an EIN Number
Once the IRS has issued an EIN to a business or entity, it cannot be cancelled, as it serves as a permanent identification number for that business or entity. This is true even if the EIN is never used to file Federal income tax returns, or for any business purposes at all. The IRS can, however, close the business account if an EIN has been received, but the business entity determines it is no longer needed. To do so, the holder of the number must send a letter to the IRS, complete with the legal name of the entity, the EIN number, the business address, and the reason the account needs to be closed. The letter should be mailed to:
Internal Revenue Service
Cincinnati, Ohio 45999
If the EIN number holder is responsible for any outstanding business taxes, or needs to file appropriate taxes, the matter must be settled before the account can be closed. Information and additional contact information can be found on the cancellation page of the IRS website.
Related Legal Terms and Issues
- Business Entity – An organization established and existing apart from any other interest, business or personal.
- Estate – All of the valuable things a person owns.
- IRA – An individual retirement account.
- Trust – An estate planning tool used to minimize estate taxes.
- Keogh Plan – A tax deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes.