EIN Who Needs It?

It is nearly impossible these days to get along without some kind of an identification number, and doing business is no exception. For the individual, your social security number has been an official means of identification for nearly everything up to and including your tax returns.

The IRS, with their fascination with numbering everything, issues your individual social security number, and not wanting to leave out business entities from being numbered and taxed, assigns what is called the Employer Identification Number, the EIN. This is the number that is used to uniquely identify a business for the purpose of taxation, and is assigned to the entire business entity, employees and all.

The number format for the EIN is 00-0000000, which is different from the familiar social security number (SSN) 000-00-0000. This makes it easier for workers and automated equipment to tell the difference between a social security account and an Employer Identification Number account.

Don’t rush right out to get an EIN if you don’t already have one as there are specific criteria that require a business to obtain an EIN. If your business meets any of the following, you are required to have an EIN:

• A business with employees
• A business with pays alcohol, tobacco, or firearms taxes
• A business which offers a retirement plan (even a sole proprietorship)
• Corporations and partnerships

A sole proprietorship may get an EIN, but it is not a requirement. Most businesses, however, do fall into one or more of these categories and are required to have one. It may be to your advantage to get one even if you are not required by law, because there are some business transactions, such as a business bank account, which does require you to have a valid EIN.
The process for getting your EIN is not complicated, and you have several options from which to choose. You can fill out the IRS Form SS-4 and mail it in, which works well as long as time is not an issue, or you can just call the IRS Business & Specialty Tax Line at 1(800) 829-4933 and tell them you need an EIN for your business.

The quickest method, and is the preferred method as well, is to apply online through the IRS Internet EIN application and you will have your EIN number in just a few minutes. Keep in mind that, even if you are given the number right away, it can still take up to two weeks for all the paperwork and records to match up with your permanent tax record. If you need to file a tax return for your business, make sure you plan ahead and apply for your EIN at least two weeks before you plan to file.
If you are required to have an EIN, or you think that it would be to your advantage for your business to have an EIN, the absolute best time to apply for one is when you are putting together your business plan before you actually start. This can save a whole lot of time, energy and frustration if you wait and have to do it later on.

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