Federal Tax ID Numbers
Obtaining an Employer Identification Number (EIN)
Getting an Employer Identification Number is required by law for many business entities. Let’s explore what it is, why you need one, and how you can obtain one.
What is a Federal ID Number?
A Federal ID Number is also referred to as an Employer Identification Number (EIN) or Tax ID Number (TIN). It is a nine-digit number used for tax filing and reporting and for other business documentation purposes.
Rather than using your Social Security Number, your Federal ID Number can be used to obtain business licenses and permits, apply for business credit cards, or set up business bank accounts. This helps establish a separation between you and your business, which can help provide some liability protection for your personal assets. It also offers some privacy protection, since fewer people will have access to your Social Security Number.
Obtaining an EIN is optional if your business is a Sole Proprietorship, but if your business acts as a C Corporation, Limited Liability Company, or Partnership, you are required to have one by law.
Here’s How to Know if You Need an EIN
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 of owners’ personal assets.
The IRS identifies these circumstances under which a business must have an EIN:
- 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
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.
Here’s How You Can Apply for EIN
The IRS allows only individuals with a Social Security Number or Individual Taxpayer Identification Number to be the responsible party on EIN applications. Entities may not use their existing Federal Tax ID Number to obtain additional EINs.
There are four different ways you can obtain an EIN:
- Online – If your business is located within the United States (or U.S. Territories) and you have a valid taxpayer identification number (Social Security Number, Individual Taxpayer Identification Number, or other EIN), you can apply for an EIN online through the IRS website. However, note that the IRS cannot process your online application request if your business’s responsible party is an entity that previously obtained an EIN via the Internet. In that situation, you’ll need to apply using one of the other available methods. They include:
- By Fax – Fax the completed Form SS-4 application to the appropriate IRS service center fax number for your state.
- By Mail – Complete Form SS-4 and mail it to the IRS at the address they provide.
- By Phone – If you’re an international applicant, you may call the IRS at 267-941-1099 to obtain your EIN. If you ask someone to call on your behalf, that person must be authorized to receive the EIN and answer questions regarding Form SS-4.
While you can manage the paperwork on your own, you can avoid the hassle of yet one more thing to do”by asking CorpNet to complete the application for you. The online application is the fastest way to obtain an Employee Identification Number.
Before CorpNet completes and submits the online application, the following steps must happen:
- The taxpayer (responsible party) signs a completed Form SS-4, including the third-party designee section.
- CorpNet 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 CorpNet successfully completes the online application, the IRS assigns the EIN and discloses it to CorpNet. The taxpayer for whom CorpNet requested the EIN will get a computer-generated notice from the IRS to acknowledge the EIN was assigned.
That was a lot of steps, but don’t worry, our team of experts will make the process easy for you.
On your application for a Federal Tax ID Number, some of the information you’ll need to provide includes:
- The legal name of the business entity or the individual for whom the EIN is being requested (and the trade name of the business if it’s different than that entity)
- The name of the executor, administrator, trustee, or “care of” entity
- Mailing address
- Physical street address
- Name of the responsible party and that person’s SSN or ITIN
- Type of legal entity
- Reason for applying for an EIN
- Date your business was started or acquired
- Closing month of your accounting year
- Maximum number of employees expected within the next year
- The principal activity of your business and main line of products sold, work done, or services provided
- Third-Party Designee (if you want to authorize someone else to receive your EIN and answer questions about your application)
By applying online, you can usually get an EIN within 24 hours. If you complete IRS Form SS-4 and fax it to the IRS, you will typically have your EIN in less than one week. For applications sent by mail, expect to wait up to four weeks for your EIN.
Realize that any mistakes in your paperwork could delay the process. and this could mean you will need to delay hiring employees, applying for business licenses, and taking care of other essential business activities.
By authorizing CorpNet 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.
