What is an EIN/Tax-ID?

It is very common for business’s to ask, “how do I get an EIN number?” An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a 9-digit number that the IRS assigns to identify a business entity. Each EIN is unique so that a business can easily be identified by the IRS. It is commonly used by employers for the purpose of reporting taxes. The number includes information about which state the corporation is registered in.

REASONS TO APPLY FOR AN EIN

A company will need to get an EIN/Tax ID Number when starting a new business. All business entities are required to have an EIN to identify the taxpayer.  If a business wants to change their ownership structure, it usually must apply for a new EIN. Any at-will hire employees, including household employees, will also need an EIN. If a business wants to open a bank account or start a line of credit, it needs an EIN. Whenever a trust, pension plan, corporation, partnership or LLC is created, an EIN is needed.

How to Look Up an EIN Number

There are multiple ways for a company to find its EIN online. This information can also be found on an employee’s W2 forms. If a company doesn’t have a W2, an applicant is also able to look up the company’s EIN online. For example, anyone can find the EIN number for a publicly traded company on the SEC Filings page. On the first page of any one of the filing documents, the EIN must be listed.

Naming a Responsible Party

For each EIN application, there is only one named responsible party, regardless of how many members are in the LLC. The responsible party’s information will then be required during the EIN process. A “responsible party” is anyone who has a level of control over the business’s funds or assets that enables the party to manage or direct the business and the nature of its funds and assets.

Prepare Your Information

The EIN application process requires general knowledge of the business and its owners. Before an LLC begins the process of obtaining an EIN, it should be prepared to have the necessary information available.

Apply for EIN Online

The online application process usually takes about 30 minutes and is available from 7:00am to 10:00pm PST. An applicant should use the SEC’s online Forms and Filings database. This database contains the SEC filings of all publicly traded corporations.

Many people use the online EIN application form, called the EIN Assistant. The IRS EIN application service processes the application with the IRS and delivers the EIN to the applicant quickly and securely via email. The application itself is simplified for easy use, accuracy and understanding. This guarantees that applications are processed quickly and delivered to the applicant the same day. However, if an applicant submits the application after 7pm EST, he will have to wait until the next business day to receive his EIN. The IRS EIN online application service team is always available by phone or email if an applicant needs help. The IRS states that an applicant must complete the application in one session, as the applicant will not be able to save and return at a later time and for security purposes, applicant's session will expire after 15 minutes of inactivity, and applicants will need to start over.

The online method is available for businesses located in the U.S. or its territories but the applicant must have a valid taxpayer identification number before applying online.

Apply for EIN by Mail

The IRS can also provide an EIN by snail mail. This takes significantly longer, usually 4-5 weeks, depending on the IRS’s capacity. If the application is denied based on an error, the applicant will have to wait another few weeks just to receive the error message. These error messages also do not provide any detailed information about how to solve the problem and may cause the applicant to have to start from the beginning.

Apply for EIN by Fax

An applicant can also apply for an EIN by fax. To do this, one must fill out the SS-4 application and fax it back to the state agency. The IRS also takes applications by fax, and typically takes up to four days to process the application. However, the applicant should note that there is no confirmation the fax was successfully delivered or not, or that the proper recipient received the application.

Receive Tax ID (EIN) Documents

Once the application is processed, the applicant should receive the EIN for the business by email. The business should also check the traditional mail for the official documents from the IRS.

Apply for EIN by Phone

An applicant can call the Business & Specialty Tax Line at (800) 829-4933 if he wishes to apply for an EIN by phone. The hours of operation are 7:00 a.m. - 10:00 p.m. local time, Monday through Friday. An agent will take the applicant's information over the phone and assign yothe applicant an EIN at the end of the conversation. International applicants must call (215) 516-6999 and is not a toll-free number.

Select the Type of Entity

A business can select the preferred entity and complete the company's information on the forms to get an EIN from the IRS. Government Assist agents can offer a filing service and process the EIN application through the IRS. The business will then receive the EIN through email the same day, typically within 60 minutes, if submitted throughout business hours.

What is an ENTITY type?

The IRS treats different entities differently depending on the set up and tax structure. Different entities include:

  • LLCs (Limited Liability Company)
  • Corporation
  • Partnership
  • Trusts
  • Estates of Deceased Individuals
  • Non-Profit Organizations.

Sole Proprietor

A Sole Proprietor is one individual that owns a company and is not incorporated or registered with the state as a limited liability company (LLC). Sole poprietors may use their social security number but can also get an EIN for their business purposes. A sole proprietor can be self-employed individual or an independent contractor. Sole proprietors may or may not have employees and includes household employers for baby sitters, nannies, housekeepers, maids, drivers, health aides, private nurses, caretakers, yard workers, and similar domestic work. The sole proprietor reports business income on the sole proprietor's individual tax return

Certain individual business owners and sole proprietors do not know which offices from the government they need to submit their paperwork for the EIN. However, the IRS-EIN-TAX-ID takes the issues out of applying for an EIN number.

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is an arrangement permissible by the state statute and is formed by filling articles of organization with the state. It is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protection of a corporation. An LLC is the most popular business entity type in America today.

Members/owners might include other LLCs, corporations, individuals, and foreign entities. There can’t be greater than one active LLC with a similar name in the same state. For federal tax purposes, an LLC can be considered a corporation or partnership, or be overlooked as an entity separated from the owner. LLCs also offer the ability to choose from multiple taxation options, such as being taxed like a Sole Proprietorship or being taxed like an S-Corporation. An LLC can be also organized as a professional limited liability company (PLLC) or a limited company (LC)

If an LLC hires employees, it needs to get a tax ID number. IRS-EIN-TAX-ID can help the LLC get the tax ID number on the same day it applies. The company will just apply online and give it a couple hours for the EIN number to be confirmed. If an LLC has multiple owners, a single representative of the LLC must be named responsible for obtaining a Tax ID Number on behalf of the LLC. In other words, the LLC may have multiple owners, but there can be only one Responsible Party obtaining the federal Tax ID Number for an LLC.

Trusts

A trust is a legal entity that is created under state law and is taxed under federal law. It can be created to perform one act or a series of acts. All types of trusts including conservatorships, custodianships, guardianships, irrevocable trusts, revocable trusts and receiverships. Trusts needs to file an IRS tax ID application. Even if the applicant created trusts before, IRS-EIN-TAX-ID can get the paperwork done correctly and quickly because one incorrect entry can result for the application to be rejected.

Estate

An estate, decedent estate or succession is a legal entity created as a result of a person's death. The estate consists of the real estate and/or personal property of the deceased person. The estate pays any debts owed by the decedent, and distributes the balance of the estate's assets to the beneficiaries of the estate.

Nonprofit/tax exempt organizations

Nonprofit or tax exempt companies include limited liability companies, trusts, corporations, and unincorporated associations that succeed as tax exempt status with the Internal Revenue Code (IRC) 501 as discussed in Publication 557. Nonprofit organizations include employee associations, private foundations, public charities, educational organizations, state-chartered credit unions, veteran's organizations, child care organizations, business leagues, and teachers' retirement fund association.

Partnership

An organization that unincorporated with not less than two members is typically classified as a partnership for federal tax purposes if it entails trade, financial operation, business, or venture, and divides its profits. A joint undertaking only to share expenditures isn’t a partnership. For instance, a co-ownership of property sustained and rented unless the co-owners deliver services to the tenants would not be classified as a partnership.

Applying for a federal identification number is one of many tasks that partners must take on when starting a business partnership. Partners can be individuals, corporations, trusts, estates and other entities.

Corporation

A corporation is a legal entity established by a charter granting it certain legal powers, rights, privileges, and liabilities. It can be established by a person or group of people with a charter from the state's secretary of state. After a corporation is created, it becomes its own entity and generally has an indefinite lifespan. Corporations can includes S corporations, personal service corporations, real estate investment trusts (REIT), regulated investment conduits (RIC), and settlement funds

When the company starts a corporation, it will need to open a business bank account that requires the company to have an EIN number for the business.

The above entities are just some examples of the types of employers that need to obtain an EIN.

If you need help getting an EIN number, you can post your legal need on UpCounsel’s marketplace.