The Employer Identification Number and Your New Business
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A tax identification number may refer to a Social Security number (SSN), an individual taxpayer identification number (TIN), or an employer identification number (EIN). In a business context, an employer identification number is the tax identification number associated with forming a business entity.
The EIN or Employer Identification Number
An EIN is a nine-digit number given to you by the IRS or the state tax board, and is almost always necessary when forming a business, as it is used to identify the business entity to tax authorities. Remember that an EIN is only for use in business matters, and you should not confuse an EIN with a Social Security number. This identification is used for remitting a business’s state and federal taxes, Social Security and Medicare taxes, and other taxes to the federal and state government. You will probably need an EIN to open a checking account for your business as well.
Situations That Require an EIN
Even if you do not have any employees, you still need to obtain an EIN.
An EIN will usually be required for each of the following situations:
- if you operate your business as a corporation or a partnership;
- if you file an Employment, Firearm, Alcohol, Tobacco, or an Excise tax return;
- if you withhold taxes from income paid to a non-resident foreign citizen;
- if you have a Keogh plan; or
- if you are involved in an estate, some types of trusts, a non-profit organization or government agency, a farmers cooperative, or a real estate mortgage investment conduit.
Generally, you will almost always need an EIN to pay taxes on your business. If you change your business structure, or even your business name, you may need to apply for a new EIN. Other circumstances may require you to obtain a new EIN for your business as well. Your requirements will depend on the type of business structure you have. The IRS website offers a list of the business structures, and the various acts or circumstances, under which you should obtain a new EIN.
Applying for an EIN
You must apply for an EIN through the IRS, and in most states, you will need a state EIN as well. You may apply for a federal EIN online or you can call (800) 829-4933. The IRS website also provides a list of state-specific websites where you may apply for an EIN either online or over the phone.