One of the essential steps new business owners must take when launching their companies is to apply for an EIN. An Employee Identification Number (also known as a Federal Tax ID Number or Tax ID Number) is a nine-digit number assigned to a business for filing taxes, submitting reports to the state, applying for business licenses and permits, and completing other documentation. Similar to how a social security number serves as identification for an individual, an EIN serves to identify a business. The IRS issues EINs at no charge.
Is an EIN Necessary?
The IRS identifies the specific circumstances under which a business must have an EIN. In these situations, an EIN is required:
- The business has employees.
- The business operates as a partnership or corporation.
- The business has a Keogh plan (tax-deferred pension plan for small businesses and the self-employed).
- The business withholds taxes on income, other than wages, paid to a non-resident alien.
- The business is involved with one or more of the following: most types of trusts, farmers’ cooperatives, estates, non-profit organizations, plan administrators, and real estate mortgage investment conduits.
- The business files certain types of tax returns, including Employment, Excise, or Alcohol, Tobacco and Firearms.
Aside from the IRS requirements, an EIN serves the vital purpose of establishing a separation between a business and its owners, thus providing financial and legal liability protection for owners’ personal assets.
Also, for self-employed individuals, it can help retain privacy and prevent identity theft. Many self-employed small business owners choose voluntarily to apply for an EIN so that they don’t have to use their SSN on 1099 forms, business credit applications, sales tax invoices, and other business documents.
EIN Eligibility Requirements
The IRS accepts EIN applications for businesses that will have their principal location within the United States or U.S. territories. The person (responsible party) ordering the EIN on behalf of the business must have one of the following types of valid taxpayer identification numbers: Social Security Number or Individual Taxpayer Identification Number (ITIN).
Ways to Apply for an EIN
The process to apply for an EIN is relatively simple. The IRS provides a variety of ordering options including applying online, applying by fax, applying by mail, or applying via a third party.
Apply Online
The online EIN application is the fastest way to obtain an Employee Identification Number. Once the application is completed, the information is validated and an EIN is issued immediately.
Apply Via a Third Party
I a business owner designates a third party to apply online for an EIN on its business’s behalf, it must first authorize the third party to apply for and receive the EIN. Before the third party completes and submits the online application, the following steps must happen:
- Taxpayer (responsible party) signs a completed Form SS-4, including the third party designee section.
- The third party retains a copy of the completed Form SS-4 in its files.
- The taxpayer reads and signs a statement indicating the understanding that he or she has authorized the third party to apply for and receive the EIN.
- The third party retains a copy of the signed statement in its files.
After those steps are taken, and the third party successfully completes the online application, the IRS assigns the EIN and discloses it to the third party. The taxpayer for whom the third party requested the EIN will get a computer-generated notice from the IRS to acknowledge the EIN was assigned.
Apply by Fax
For a business to obtain an EIN via fax, an authorized party must complete and fax Form SS-4 to the IRS at 855-641-6935.
Apply by Mail
The processing timeframe for a mailed EIN application is approximately four weeks. Mailed EIN applications should be sent to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Information Required to Get an EIN
Whether filing online or by fax or mail, below is some of the information the applying party should expect to provide:
- The legal name of the business entity
- Name of the executor, administrator, trustee, or “care of” entity
- Mailing address
- Physical address
- Name of the responsible party and that person’s SSN, ITIN, or EIN
- Type of legal entity
- Reason for applying for an EIN
- Date the business was started or acquired
- Closing month of the business’s accounting year
- Maximum number of employees expected within the next year
- Principal activity of the company and primary line of products sold, work done, or services provided
- Third Party Designee (if applicable)
When to Apply for an EIN
A business should apply for its EIN in advance of when it will need to file a tax return or make a tax deposit.
How Long Will It Take to Get an EIN?
Applying online is the fast way to get an EIN because the IRS will immediately assign one upon the submission of an approved application. According to the IRS, it takes about one week for an EIN to be issued when applied for by fax. By mail, it may require approximately four weeks.
The IRS instructs businesses that have applied for but have not received their EIN in time to make a required filing or deposit to write “Applied for” in the space where the EIN is supposed to be entered.
EIN Restrictions
In 2012, to enable fair treatment for all taxpayers, the IRS began limiting the issuance of EINs to one EIN per day per responsible party. This restriction applies whether EINs are requested through the online form, by mail, or by fax. On May 13, 2019, the IRS made further revisions to the EIN process to enhance security. In the past, entities could use their existing EIN to apply for additional EINs, but the updated rules now allow only individuals (a.k.a., the “responsible party”) with an SSN or ITIN to obtain an EIN.
How CorXec Can Help
If an EIN application isn’t completed correctly or on time, it could mean you will need to delay hiring employees, applying for business licenses, and taking care of other essential business activities.
By authorizing CorXec to fill out the EIN application and submit it for you, you can avoid those issues. You’ll find that our fees to take care of the paperwork are minimal and well worth the peace of mind that your business has what it needs to move forward.
Contact my team at CorXec today for help in obtaining your EIN and handling all of your other business startup and compliance document filings.
