All the business and startups before establishing there ground in the market place must know that the Employer Identification Number is mandatory for them to issue. The EIN number is popularly known as federal tax ID as well. A business owner needs to pay this tax for hiring employees in a company. In this article, how we can apply for EIN number online. Before moving on to this let’s have a look at what is EIN Number.

Introduction to EIN Number

U.S. businesses are given an employer identification number, commonly referred to as EINs like their iD proofs are social security numbers. EIN stands for Employer Identification Number. It’s a unique 9-digit number that recognizes your business entity to the IRS. When you register any kind of federal tax return, this is whereby you’ll acknowledge your business. Moreover, another name for EIN is the Federal Tax Identification Number. This number is register to hire employees in the business.

EIN is assigned by the Internal Revenue Service (IRS) and essentially utilized to report employment taxes. They never expire and are not reissued to a different business.
Be cautious to never give out your EIN except you require to—in the wrong hands, it can be applied for identity theft

Eligibility for EIN Number

To get an EIN, a business requires to be located in the U.S. and the person appealing for the EIN must have their taxpayer identification number, like a social security number.

A wide variety of entities may apply for and be allotted an EIN. From sole proprietorships to corporations, LLCs, corporations, government agencies, non-profits, and other kinds of organizations.

There are no size specifications or limitations, as far as employees are concerned. A sole proprietorship with only the owner as an employee can demand one, as can a multinational corporation or charity.

Guidelines for EIN Number

The guidelines used by the IRS for concluding if an Employer Identification Number (EIN) is needed implies that most businesses must have an EIN. Also, acquiring an EIN is an essential step to setting your business. Moreover, it will help you keep your legal and business matters in order.

As soon as you start your business, you’ll need to appeal for an EIN. You must wait until you’ve enrolled your company in the state where you plan to do business. But you’ll require an EIN before you can open a business bank account.

According to the IRS, your business/companies must have an EIN if:

According to the IRS, your business/companies must have an EIN if:

  • Your business has employees
  • Your business is a partnership or corporation
  • You have registered or will file tax returns for any of the following: 
  1. Alcohol 
  2. Tobacco
  3. Firearms
  4. Employment
  5. Excise
  • You keep taxes on income paid to a non-resident foreigner

Or if you’re concerned with any of the following:

  • Trusts (except with some Exempt Organization Business Income Tax Returns) grantor-owned revocable trusts, IRAs, or estates
  • Plan trustees
  • Farmers’ cooperatives
  • Real estate mortgage financing channels
  • Non-profit organizations

Besides filing taxes, you may also require an EIN to:

  • Start a bank account in the name of your business
  • Appeal for a credit card in the name of your business
  • Appeal for business permits
  • Register for a business license
  • Register for a business loan
  • Provide self-governing contractors with aForm 1099

Another purpose you may need to appeal for an EIN is for your privacy. For example, if you’re a builder who works with a large number of clients, revealing your Social Security Number may open you to identification theft.

Alternatively, apply for an EIN. Fulfilling so won’t reduce your chances of falling victim to identity theft. Also, it will likely keep the thief away from obtaining your private accounts.

Type of business needs for issuing EIN Number

It acts as a national identity for a business. Any business that hires employees requires an EIN, but most businesses, even those without employees, have one. An online payroll service can assist pay employees and even take care of payroll tax filings and payments. Additionally, companies and partnerships all require an EIN from the IRS. LLP, Private Limited Company and many other firms.

United States-based businesses

Before you apply, get sure you have a social security number or Individual Taxpayer Identification Number (ITIN). And comprehend what kind of business you’re appealing. Only the “responsible party” can register, which is the business owner.

We will fill out Form SS-4 and fax or mail it to the IRS.

International businesses

If you don’t have a legal home or a main place of business in the U.S., but you do require to file taxes there, you’ll be recognized as an international applicant.

Obtaining an EIN for an international applicant requires a little more paperwork, so you’ll want to follow the instructions from the IRS.

What do you need an EIN Number for?

Some kinds of businesses that do not require an EIN, such as sole proprietors, prefer to get the ID from the IRS anyway. Many autonomous entrepreneurs (a type of sole proprietor) use an Employer Identification Number rather than their Social Security number to protect against identity theft. Sole proprietors also sometimes apply an EIN to attest their status as an independent entrepreneur rather than an employee.+

Most self-employed communities and small business owners will require an Employer ID. The number at some point (even non-profit organizations), but you’re lawfully required to obtain an EIN if you answer yes to any of the following questions:

  • Does your business have any workers?
  • Does your business work as a C corporation, S corporation, limited liability company or partnership?
  • Do you register employment or excise tax returns?
  • Do you keep taxes on income, other than wages, paid to a non-resident?

The IRS applies EINs to identify businesses for tax objectives. Moreover, businesses use their EIN to begin business checking accounts, appeal for business licenses, and settle accounts with merchants.

Benefit of having EIN Number

  1. A company’s EIN is unique to every business. It’s applied to file your business’s tax return and pay your workers, and most banks or credit unions won’t start a business account till they have an EIN. 
  2. The 9-digit number never expires, and it will never be reissued to another business.
  3. Therefore, no other business will regularly have your EIN assigned to them even if you go out of business. So an EIN assists guard your business’s status in the same way that your Social Security number helps preserve your identity.

Procedure to apply for EIN Number

Step 1: Prepare Your Eligibility

  • You may appeal for an EIN online if your main business is established in the United States or U.S. Territories.
  • The candidate applying online must have a correct Taxpayer Identification Number (SSN, ITIN, EIN).
  • You are restricted to one EIN per responsible party.

The “responsible party” is the person who eventually owns or manages the entity or who operates ultimate effective power over the entity. Except for the applicant is a government entity, the responsible party must be an individual, not an entity.

Step 2: Filling the Online Application

To file online, you require to meet some requirements: You must have a valid U.S. ID number (like a social security number), 

When you have finished the form, the data is validated, and you can get your EIN immediately. The online method is available for businesses established in the U.S. or its territories. You must have a valid taxpayer identification number prior to applying online.

Step 3: Getting a state EIN

If your state needs you to pay state income taxes, you may require to get a state EIN. The details vary from state to state, so you’ll require to check with your state tax authority on how to receive a state EIN (if you need one).

Step 4: Submit Your Application

After all, validations are done you will receive your EIN instantly upon completion. You can then download, save, and print your EIN confirmation notice from mails send by us.

Importance of Responsible party on your EIN Number application

The EIN application Form SS-4 will require you do recognize a “responsible party” for your business. For many years business owners are facing difficulty in the term ‘responsible party.’ Because of that confusion, the IRS declared an explanation. Now, the process is simplified in EIN application there is no requirement to ask for general partner name, trustee, owner name, etc. It just asks for the identification of the “responsible party.” The IRS needs to be sure that they are communicating with the person liable for the business.

Role of responsible party :

  • To apply for an EIN number, you must give the IRS with a responsible party. This is the person who guides, manages or regulates the business asking the EIN. 
  • If more than one person runs your company, you can decide who you want the IRS to hold the responsible party — only one person can be nominated this way.
  • Just to be clear, no one other than the designated responsible party can make IRS-related changes. For example, if you modify the address of your company, the firm party needs to be the person to inform the IRS.

If you need to replace your address, you will practice Form 8822-B. This form can also be applied to change the name of the accountable person. But, the IRS recommends companies to discuss with a tax specialist or accountant before filing Form 8822-B.

Will you ever require to replace or get a new EIN Number?

Yes, businesses typically require a new EIN when they’ve had a shift of ownership or structural reform. 

If you make simple changes to your business like editing the name or address of your business you won’t require a new EIN. But the IRS states that if the ownership or formation of your business advances, you will require to ask for a new EIN. If you edit your EIN, you’ll also require to renew the info in your business software.

Based on your business formation, here are a few cases when you’ll need to get a unique EIN.

Sole proprietorships

If you run a sole proprietorship, you will require to renew or apply for a new EIN if you include or get partners, if you’re the subject of a bankruptcy, or if you receive or purchase an existing business that you intend to work as a sole proprietorship.

Partnerships

For a partnership, you will require a new EIN if you join, if you have a partnership that is taken by one of the partners and will now be operated as a sole proprietorship, or if you end one partnership and start a new one.

Corporations

If your company is a corporation, you’ll require to replace or apply for a new EIN. If your corporation is assigned a new charter by the secretary of state if you improve the structure of your business to a partnership or a sole proprietorship. Or become a subsidiary of a corporation using the parent company’s EIN, or if you change your company structure and a new company is formed after a statutory merger.

Limited liability companies

For an LLC, you will appeal for a different EIN or edit an existing EIN if you build a new multi-member LLC under state law, if a new single-member LLC is formed under state law and files as a corporation, or you create a distinct single-member LLC that is expected to register excise taxes.

Estates and trusts

The equivalent applies to both estates and trusts. You will require to renew or apply for a new EIN if you form a trust using funds from the estate. Or if you are a representative of an estate that is operated as a business following the death of its owner. For trusts, if there is a difference in the identity of the trustee or if the recipient or grantor transfers his or her name or address you will have to appeal for a new EIN.

Also read about:

Why use partnership instead of an S corp?
Payroll Tax: What is it & How to Calculate it | with Example
10 Common Invoicing Mistakes You Can Easily Avoid

How to check an EIN Number

There may come a time when you require to search for another business’s EIN, for your tax purposes or to validate some information.

Here’s how:

  • If you’re an employee and require your employer’s EIN, it’s on the back of your W-2 form
  • If the business is openly traded, use the Security and Exchange Commission’s EDGAR tool to look it up for free
  • If the business is personally held, you may require to track down its accountant to investigate or use a lookup service 

Conclusion

Apply for an EIN with the IRS help tool. An Autofiling will guide you by questions and ask for your name, social security number, address, and your “Doing Business As” (DBA) name. Your nine-digit federal tax ID becomes accessible instantly upon verification.
For more details log into our website. Autofiling, our expert will guide you in buying EIN. To simplify your accounting and bookkeeping services do contact us.