An Employer Identification Number is a nine-digit identification number the Internal Revenue Service (IRS) uses to identify a business. Just as the IRS uses a Social Security Number to track tax accounts and annual returns for individuals, the IRS uses an EIN to perform these functions for a business.
Do You Need an EIN?
An EIN is needed if you have employees or have a Keogh plan, which is a retirement plan for self-employed people. If you run your business as a corporation or partnership, you will need one as well. This number is also needed if you file any of the following tax returns: Excise, Employment or Alcohol, Tobacco and Firearms. Lastly, an EIN is required if you withheld taxes in income other than wages and paid it to a non-resident alien.
How to Apply
The first step is to check with your state to see if you need a state number. Once this is ascertained, you may apply to the IRS for your EIN number. This can be done online as well as by phone, fax or mail. All methods of application are free of charge.
- Rather than requiring you to file an SS-4 Form, the online process involves filling out an interview-style application. If you need help in completing the form, click on the hyperlinked keywords for definitions and instructions. Once the form is completed, it will be validated, and the issuance of your EIN will follow immediately. The confirmation process permits you to download, save and print the information.
Apply by Toll-Free Phone
- Call the Business and Specialty Tax Line on Monday through Friday between the hours of 7 a.m. to 7 p.m. local time. The number is (800) 829-4933. After you provide the required information to the assistor, you will immediately receive your EIN.
Apply by Fax
- The fax method involves sending the completed SS-4 application to your state fax number. If the IRS determines that a new EIN is needed, they will assign you one and fax it to you within four business days.
Apply by Mail
- Mail your completed SS-4 Form to the address shown here. If the IRS determines that you need a new EIN, one will be issued and mailed to you within four weeks.
What Is Involved in the Application Process?
The application should only take a few minutes and will require you to:
- State the legal structure of your business: Sole Proprietorship, Partnership, Corporation or Limited Liability Company.
- Provide your name, address and social security number.
- Select from several reasons for applying for an EIN.
- Select the general category of your company’s industry.
- State the products or services your business offers.
When Do You Need a New EIN?
Generally, when the structure or ownership of your business changes, you will need to obtain a new EIN.
- A new EIN is required for sole proprietorships when they incorporate, file for bankruptcy or take in a partner. Also, if you acquire an existing business in which you will operate as a sole proprietor, you will need a new EIN.
- However, you will not have to obtain a new number if you operate multiple businesses. Nor will one be needed if you change your company’s name or location.
- The IRS requires corporations to procure a new EIN when they get a new charter from the Secretary of State. A new number is also needed when the corporation becomes a subsidiary or if a new corporation has formed after a statutory merger. A change to a partnership or sole proprietorship necessitates a new EIN as well.
- Corporations won’t be required to get a new EIN if they declare bankruptcy, are a division of a corporation or choose to be taxed as an S corporation. Other conditions not requiring a new EIN include name or location changes in addition to corporation reorganizations that alter only the identity or place.
- New EINs are also not needed in cases of corporate mergers where the surviving corporation uses the existing EIN. Finally, new EINs are not required when a corporation experiences conversion at the state level without changing the business structure.
- New EINs are needed if a partnership incorporates or if one of the partners takes it over and operates it as a sole proprietor. Another situation mandating a new EIN is severing an old partnership and starting another one.
- No new EINs are required if the partnership declares bankruptcy or changes its name. Changing your location or adding extra locations does not necessitate a new EIN either. Another case where a new EIN is not needed is the formation of a new partnership resulting from the ending of a partnership under IRC Section 708(b)(1)(B). Lastly, new EINs are not necessary when at least 50 percent of the ownership changes within a 12-month period.
Who Is the Responsible Party?
The person the IRS calls the “responsible party” (i.e. the individual who manages and controls the assets of the business) must complete all EIN applications. When the company has more than one responsible party, it should designate one to be recognized in this capacity by the IRS.