You’ve started a business, you’ve put together a business plan, you’ve picked out a business name, and you’ve registered the business. What next? It’s time to get an Employer Identification Number (EIN).
Enabling the Inland Revenue Service (IRS) to identify your business for taxation, this is an extremely important piece of documentation that most businesses will need to apply for.
But what is an Employer Identification Number? Find out everything you need to know about how to apply for an Employer Identification Number, right here.
What is an Employer Identification Number?
An Employer Identification Number – also known as a Federal Employer Identification Number – is a unique, nine-digit code that’s issued to US businesses by the IRS for tax ID purposes. Think of it like a Social Security number, but for businesses rather than people.
Who needs an IRS Employer Identification Number?
To receive an EIN, businesses must be located within the US and the person making the application must have a valid Taxpayer Identification Number (SSN, ITIN, EIN).
Many different types of business entities can apply for an IRS Employer Identification Number, including partnerships, LLCs, sole traders, corporations, non-profit corporations, and government agencies.
Who is the ‘responsible party’?
According to the IRS, when you apply for a Federal Employer Identification Number, you are limited to one EIN per responsible party per day.
The responsible party is the person who owns or controls the business. Unless the applicant is a government entity, the responsible person is required to be an individual.
What is the purpose of a Federal Employer Identification Number?
Businesses need a Federal Employer Identification Number for a range of different processes, including paying taxes online, issuing payroll and tax documents, and filing annual tax returns. In addition, businesses will need to have an EIN to open a business bank account and apply for business licenses.
What does an Employer Identification Number look like?
Federal Employer Identification Numbers are nine-digit numbers that are formatted as follows:
Before 2001, the first two digits (the EIN prefix) indicated that the business was in a certain geographic area. After 2001, however, EIN assignments were centralized, which means that the EIN prefix no longer has the same significance. Now, the first two digits indicate which IRS campus assigned the Employer Identification Number.
How to apply for an Employer Identification Number
Want to know how to get an Employer Identification Number? It’s relatively straightforward – all you need to do is apply online.
It’s important to note that the application must be completed in one session. In addition, you should remember that the session expires after 15 minutes of inactivity, and if the session expires, you’ll need to start over from the beginning. As a result, it’s best to set aside a good amount of time so that you can complete the session in one go.
When can I start using my IRS Employer Identification Number?
After you apply for your Federal Employer Identification Number, you’ll need to verify the EIN by calling the IRS’s Business & Specialty Tax Line (800-829-4933). After verification, you will receive the EIN immediately.
However, the EIN doesn’t become part of the IRS’s permanent records for up to two weeks. Until this happens, the EIN cannot be used for the following activities:
Making an electronic payment
Filing an electronic return
Passing an IRS Taxpayer Identification Number matching program
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