EIN: What you need to know about Employer Identification Numbers

What is an EIN?

An EIN, or an employer identification number, is also sometimes known as a federal tax identification number. It is used to identify a business, and it’s not for the average taxpayer. An EIN, which is issued by the IRS, is only for businesses. It’s a unique nine-digit number, like a Social Security number. You need to follow the state rules and regulations when forming specific business types before applying for an EIN.

Who needs an EIN?

Most people need an EIN when they decide to open a new business or hire employees. Government agencies, nonprofit organizations, and trusts and estates need EINs to pay vendors, hire staff, and file tax and payroll forms when they are separate from personal finances.

You don’t need employees to have an EIN, you just need to have a business. Even if you’re a freelancer, have a side gig, or operate as a sole proprietor with no employees, there are numerous benefits to using an EIN for your business instead of your Social Security number. A single member LLC or sole proprietorship without employees does not need an EIN. These taxpayers can just use their Social Security number to complete their Schedule C, Profit or Loss from Business, when filing their taxes. But if you want an EIN for your self-employed business, you can certainly get one.

What are the common uses of EINs?

The IRS requires businesses to get an EIN as a part of reporting requirements. Regardless of the type of entity a business is, they must have an EIN if they:

• Have employees
• Operates as a corporation or partnership
• Files employment, excise, or alcohol, tobacco, and firearms tax returns
• Withholds taxes on income paid to non-resident aliens
• Has other reasons
• Has operations that are a bit more complex and has other reporting considerations

EINs don’t expire, and the unique number won’t get used again – even if your company goes out of business. The most common uses for an EIN include:

• Hiring employees
• Paying employees
• Opening business bank accounts
• Filing business taxes
• Registering state business taxes
• Keeping personal finances separate from business finances

The most common benefits of an EIN are:

• Keeping personal finances separate from business finances
• Protecting the business owner's social security number

How do I apply for an EIN?

It’s free to apply for an EIN, but the business must be located in the U.S. to be approved.

You can request an application in a variety of ways, including online, by phone, paper filing, or even faxing the application.

The process isn’t complicated, but there may be some questions that can be confusing. It doesn’t hurt to ask a tax expert for assistance so nothing is done incorrectly, which could delay the IRS in processing the request.

To get an EIN application, complete Form SS-4, Application for Employer Identification Number.

• On the form, you’ll include the name of the company’s principal officer, partner, trustee, owner, or any other title, along with their Social Security number.
• Form SS-4 also has information you’ll need to fill out that identifies the type of business and entity it is, the reason you’re applying for the EIN, and the start or acquisition date of the company.

When should I file Form SS-4 and receive my EIN?

If you plan on forming a business entity other than a sole proprietorship, you should wait until you have your approved articles of organization or corporate charter from the state where you formed your business. Once you have these documents, you should file for an EIN before you take other steps to formalize your operations, such as opening a business bank account. It is one of the important early first steps to take as you form and grow a business.

If you are operating as a sole proprietorship without creating an actual business entity, you can request an EIN right away and immediately begin using it with your clients, bank accounts, and any other situations requiring a tax identification number.

Your EIN will be created instantly if you use the online application, and the IRS will also mail a copy of the notice containing your new EIN. If you are filing SS-4 on paper, your EIN will arrive in 4-6 weeks, or 8-10 weeks if you are outside the U. S.

How do I find my EIN?

The IRS will mail you your approved EIN. Once you receive it, store it in a safe place because there’s no easy way to search for it online. Your EIN confirmation letter may also be emailed to you. You can also call the IRS if you’ve lost the number, and they will mail you another copy.

Frequently asked questions about EINs

What happens if I lose my EIN?

You’ll need to contact the IRS directly. Do NOT apply for a new number. Unless you request a change in your EIN, it will always be the same number.

When should I change my EIN, or apply for a new EIN?

If you’re simply changing the name of your business or moving, you don’t need to request a new EIN, but there are a few reasons that come to mind for when you should make the request to change, including:

• When you’re starting another new business
• Changing from a sole proprietor to a partnership or corporation
• A new partnership is formed after a partner exits or enters the current partnership
• You bought or inherited a business and want to treat it as a NEW business
• Bankruptcy proceedings
• A new corporate charter is issued by your state
• Some other reasons

Is an EIN the same as a tax ID?

Yes, an EIN is a tax ID or TIN, a tax identification number, and is used to identify a business. An individual tax ID is a social security number (SSN), individual tax identification number (ITIN) or an adoption tax identification number (ATIN)

What’s the difference between EIN and an ITIN?

An ITIN is used to identify people who can’t obtain a Social Security number but do earn income in the U.S. and are required to file a federal income tax return. This includes people who are:

• Non-resident aliens who should pay taxes
• Resident aliens who should pay taxes
• Non-residents claiming tax benefits
• A dependent or spouse of a non-resident visa holder

An ITIN  is only available when an individual can't get a social security number and needs to file a tax return.

Do EINs expire?

No, they don’t expire, and they won’t change on their own.

Are you starting your own business and need an EIN? Find a Jackson Hewitt office near you and work with a Tax Pro today.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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