How to get a Federal Employer Identification Number (EIN) and Who Needs To Get It.
For new business owners, you might have already heard about EIN or Employer Identification Number and not quite sure if you need to get one for your new business.
What is an EIN or Employer Identification Number?
An Employer Identification Number (EIN) is a Federal Tax Identification Number used to identify a business entity. Generally, businesses need an EIN. You may apply for an EIN in various ways. Visit the Irs.gov website to apply for an EIN online. This is a free service offered by the Internal Revenue Service and you can get your EIN immediately. You must check with your state to make sure you need a state number or charter.
What is the Purpose of an Employer Identification Number
Employer Identification Numbers are issued for tax administration and are not intended for participation in any other activities such as tax lien auction or sales, lotteries, etc.
According to the IRS, if you are a sole proprietor who has no employees and who files no excise or pension tax returns, you can use your Social Security number as your identification number.
Otherwise, you must have an employer identification number (EIN) if your business fits any of these situations:
- You are a corporation or partnership.
- You pay wages to one or more employees.
- You file pension and excise tax returns.
You get a Federal EIN from the IRS by applying online, by FAX, by mail, or at a local IRS office. You need to follow some steps as your guide in applying for an EIN. This will also determine your eligibility.
Here are the steps that you need to do before applying for an EIN.
Step 1: Determine Your Eligibility
- You may apply for an EIN online if your principal business is located in the United States or U.S. Territories.
- The person applying online must have a valid Taxpayer Identification Number (SSN, ITIN, EIN).
- You are limited to one EIN per responsible party per day.
- The “responsible party” is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.
Step 2: Understand the Online Application
- You must complete this application in one session, as you will not be able to save and return at a later time.
- Your session will expire after 15 minutes of inactivity, and you will need to start over.
Step 3: Submit Your Application
- After all validations are done you will get your EIN immediately upon completion. You can then download, save, and print your EIN confirmation notice.