Key Points
- An Employer Identification Number is a nine-digit unique number allotted to any business.
- EIN enables the IRS to recognize businesses for tax purposes.
- If a business wants to apply for a free EIN they can go through the IRS official website and fill up the required details in the application.
- EIN also allows businesses to open bank accounts and apply for loans.
- You can find your business’s EIN by checking your business papers, checking your tax file, consulting your bank, or directly contacting the IRS.
- You can change your EIN if you are changing your business entity type. Especially when you are shifting from a sole proprietorship business to a partnership.
You need to do a lot of paperwork for your time-to-time track while starting a business. To start a new company or business the first most work you need to do is to register a name, choose the entity type, you need to open several bank accounts, come up with a perfect business plan, and look for investors interested in investing in your business. You have to keep in mind all these essential things as they will affect your future.
For the registration of a business in a new area or locality or applying for a Paycheck Protection Program (PPP) loan, every businessman needs to know their EIN. To know further about EIN, read this article. You will get everything you want to know about it.
Do You Know What EIN Is?
The word Employer Identification Number (EIN) is a unique number that is used as an identifier allotted to a business or a company. This number is used to easily identify any business or a company by the Internal Revenue Service (IRS).
The Employer Identification Number (EIN) is like a Social Security number of a business entity. This unique number is generally used by employers to file business taxes. The format of this unique number is just similar to a Social Security number with nine digits assigned by the federal government “XX-XXXXXXX”. If you do not have EIN, you can apply for it via the IRS.
Why Does One Need an EIN?
The Employer Identification Number represents an identifier and tax ID number of a business. It is used to file taxes, apply for loans, and to build business status. If you get a license for a Tax Identification Number or TIN, it is like an EIN. If your business entity is of a sole proprietorship, then you do not need EIN, but if you are hiring employees and investors. Below is a list of reasons you need an EIN.
- Employees- If you are looking forward to hiring some employees then you need to have an EIN. This number will be used by the IRS to track all your tax remittances. Any business except sole proprietorship will also need an EIN whether they have any employees or not.
- Banking and finance – Frequently, to create a bank account for any kind of business, estate, or non-grantor trust, banks and credit unions want a current EIN. For a business looking to secure funding or working capital, having an EIN may also be beneficial.
- Self-employed retirement plans – To facilitate the federal tax treatment of a Keogh or Solo 401(k) plan, a self-employed person who desires to form one will need to obtain an EIN.
Situations in which sole proprietors might want an EIN Both people who buy or inherit an existing firm that they intend to manage to go ahead as a sole proprietorship and sole owners who are filing for bankruptcy for their business will need an EIN.
How To Find EIN Number For Business?
If you are not able to find your EIN below are the ways you can go for it. Read to know more about this.
- Examine your entity’s paperwork:
When any new businesses register with the IRS, a letter confirming their EIN is sent out. If you just signed up for one, keep that letter in a secure location. Your EIN will be listed on state tax account registration papers and business license applications. To locate the number, look through each one of these.
- Examine your tax records:
You can find your EIN in your tax records in the top right corner of your business tax return file. If you open the return and the number has been shifted to an asterisk for security reasons, get in touch with your CPA and ask them for the original number.
- Return for company taxes, Form 1065:
On a business tax return, the business EIN is located in the upper right corner. If you use tax software to file your taxes, the program will save the number for future use. To retrieve your EIN, go to the business portion of the software.
- Consult your banker:
The bank has your EIN on file if you’ve asked for a loan or even a business checking account. For the number, ask your manager or the branch manager.
- Phone the IRS:
In the worst-case scenario, if none of the alternatives above are successful, you can directly contact the IRS. After asking you several verification questions, they will give you the number.
Frequently Asked Questions (FAQs):-
- Do you ever need to change your EIN?
If you are planning to change your business type, then you have to change the EIN of the business. You usually need to change your EIN when you are changing your entity type from sole proprietor to a partnership. It will be a good idea to choose your entity type before starting a business this will lead you to prevent changing your EIN.
- How to cancel your EIN?
Once an EIN is allotted to you it will be always linked to your business. If you want to cancel your EIN you need to close your tax accounts with the IRS.
