Your Guide To EIN

Whether a sole proprietor or a company, every business must obtain an Employer Identification Number. EIN is unique for every business and is nine-digit long. It serves the same purpose as a Social Security number for individuals. It enables tax identification for Internal Revenue Services. Also known as a federal tax identification number, every firm can apply for free and receive it on the same day on the IRS website. It enables them to pay their taxes and get recognized by IRS. Many outsourcing payroll companies assist firms with obtaining an EIN. However, you should never give your EIN to another party unless necessary. You can become a victim of identity theft. 

 

Who needs EIN? 

The Employer Identification Number is necessary for every business, self-employed folks (even tax-exempt and non-profit organizations). IRS uses it to identify tax returns of businesses and taxpayers. However, legally, if you answer yes to the following questions, bookkeeping outsourcing services must get EIN: 

  • Do you have employees in your business? 

  • Do you operate as a C corporation, S corporation, Limited liability corporation (LLC), or partnership? 

  • Do you lodge employment or excise tax returns? 

  • Do you withhold taxes on the income of a non-resident, other than wages? 

 

Sole proprietors usually do not require EIN. They can use the social security number for tax. However, if they want to hire employees, file excise returns, incorporate, etc., they will need EIN. Even if it is not mandatory under law, businesses must obtain EIN to open business bank accounts credit cards, apply for licenses, and secure finances. Also, depending upon the state your business resides in, you need to get a state EIN. 

 

Applying for EIN is a simple process. You can consider outsourcing payroll professionals to assist you and provide their expertise. However, you need to free up considerable time to answer all the questions in one go. For US-based firms, online application is an efficient process. However, they can fill out IRS Form SS-4 and mail or fax it to the IRS. Only the business owner or principal officer can apply for EIN. They must possess Social security number or Individual Tax identification number. You must know your business name and not ‘Doing Business As’ for IRS to identify. A business not based or having principal operations in the US needs to get EIN as an international applicant. However, the process is pretty complex and involves paperwork. 

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