What Is an Employer Identification Number (EIN)?

What Is an Employer Identification Number (EIN)?

Let me explain what an Employer Identification Number, or EIN, really is. It's a unique identifier assigned to your business by the Internal Revenue Service. You use it to identify your company on tax filings and other documents. If you need one, you can apply directly with the IRS, and they typically issue it right away.

Key Takeaways

Here's what you need to know upfront. An EIN is a unique nine-digit number given to a business entity. It helps the IRS identify businesses for tax reporting. If your business meets certain criteria, you must have an EIN before you start operating. Applying is free, and you can do it on the IRS website. Beyond taxes, an EIN lets you open bank accounts and apply for credit.

Understanding the EIN

Think of EINs as the business version of Social Security numbers for individuals. They're also called Federal Tax Identification Numbers. These are unique nine-digit codes formatted like XX-XXXXXXX, issued by the IRS to track taxpayers who file business tax returns. Each EIN is exclusive to one business and never expires or gets reassigned, even if the business shuts down. You have to apply for one before your entity can begin operations.

EINs go to all sorts of entities, from limited liability companies and sole proprietorships to non-profits, government agencies, corporations, partnerships, churches, military entities, farmers' cooperatives, Indian tribal governments, estates, trusts, and more. The IRS doesn't care about your company's size—whether you're a one-person operation or a huge corporation, you're eligible if you qualify.

Fast Fact

Unlike a Social Security number, an EIN isn't sensitive information, so businesses often share it freely online or in print.

Criteria for an EIN

You need an EIN if your business or entity has employees, operates as a corporation or partnership, files tax returns for employment, excise, or alcohol, tobacco, and firearms, withholds taxes on income paid to non-resident aliens (excluding wages), has a Keogh plan, or is involved with trusts, estates, non-profits, or similar organizations.

How to Get an EIN

Getting an EIN doesn't cost anything, and you can apply by phone if you're outside the U.S. but planning business here, or by fax, mail, or online. The process is straightforward. You fill out Form SS-4, which you can find on the IRS website. On that form, include the name and personal taxpayer ID of the principal officer, grantor, general partner, trustor, owner, or equivalent. Also provide the entity type, reasons for applying—like starting a new business or changing structure—the start or acquisition date, and the principal industry.

To apply online, your business must be in the U.S. or its territories; once validated, you get the EIN immediately. Remember, the responsible person must be an individual, not an entity, unless it's a government one.

Benefits of an EIN

The primary benefit is that you can't operate your business without one if it's required—you apply before you even start. With an EIN, you can hire and pay employees, open bank accounts, get credit, invest cash, maintain corporate protections, and file business and state taxes. It also separates your personal finances from your business, which is key for self-employed folks like subcontractors. They can use an EIN instead of their SSN for tax reporting, protecting personal info from identity theft.

Fast Fact

If your business changes structure, like a sole proprietor incorporating, you must apply for a new EIN.

Closing Your EIN

Once assigned, your EIN is permanently linked to you and your company—the IRS never cancels it. It's crucial for financial reporting, but even if you never file returns, it stays associated. If you decide you don't need it or close the business, the IRS can deactivate the account. This happens with startups that fizzle out. Send a letter with your legal name, address, EIN, assignment notice if you have it, and closure reason. The EIN remains, but the account gets suspended.

EIN vs. Taxpayer Identification Number (TIN)

A Taxpayer Identification Number, or TIN, is a general term for any ID used on tax forms, including EINs, SSNs, ITINs, ATINs, and PTINs. For you as a taxpayer, the TIN might be your EIN if you're a corporation, partnership, trust, or estate, but for employees, it's usually their SSN.

What Happens If You Lose or Misplace Your EIN?

If you lose your EIN, check the IRS notice they sent you. Otherwise, your bank can provide it, or look on your tax returns. As a last resort, call the IRS Business & Specialty Tax Line at 1-800-829-4933 with your identifying info ready.

Does My Business Need an EIN?

Most businesses do, especially if you have employees, are a corporation or partnership, file specific tax returns, withhold taxes for non-resident aliens, or have a Keogh plan.

How Long Will It Take to Get an EIN?

Online applications give you an EIN immediately. Fax takes about a week, and mail can take four to six weeks.

The Bottom Line

An EIN is a unique nine-digit number from the IRS that you must get before your business starts operating. You'll need it for taxes and finances—request it by filling out Form SS-4 on the IRS site.