The terms "EIN," "employer ID," "Tax ID," and "taxpayer ID" are tossed around loosely, but there are distinct differences between these terms. The IRS has very specific definitions, and you should know what they mean.
The general term is "taxpayer ID," which is one of several different numbers. The employer ID is a taxpayer ID for a business, while a Social Security Number is a taxpayer ID for an individual. Another type of tax ID is what's called an "Individual Taxpayer ID," which is used for individuals who don't have a Social Security number.
Your business may need an Employer ID Number (EIN) if you have employees or if you file certain kinds of taxes, if your business is taxed as a corporation or partnership, and other circumstances.
If your business is a sole proprietorship (not registered with your state as an LLC, corporation, or partnership), and you don't have employees, you may not need an Employer ID Number for tax purposes.
But you might need an EIN for other reasons. One of the most common reasons you need an EIN is when you start your business and apply for a business checking account.
You may also need an Employer ID if you are applying for a business license.
You may apply for an EIN using IRS Form SS-4. T Even if you are applying online for your EIN, you should print out the form and answer the questions first.
The application asks a series of questions about your business - whether you have or will have employees, or when your business fiscal year (financial year) ends, for example. One of the most confusing sections is how to categorize an LLC, particularly for a single-member LLC.
The best way to apply for an Employer ID is online. The online application process takes only a few minutes, and you will receive your EIN immediately after the application is completed and submitted.
Go to the page of the EIN Assistant on the IRS website. If you go to this page outside of their service hours, you may find the site unavailable.
This article includes suggestions for places to get help in applying for your EIN. It also discusses places NOT to go - online sites that charge large fees for filing an EIN.
You can apply for an EIN yourself, but be sure you know all the answers to the questions on the form before you begin your application.
You may need a new EIN in some circumstances, but simple changes to your business usually don't require a new EIN.
If you are making changes to your business, you may need a new EIN. This article lists the circumstances when you must change your EIN and those when you should not make this change.
You don't need a new EIN if you change the name or address of your business. The article explains what forms are needed for these and other changes to your business.
Should you incorporate and then get an EIN, or get the EIN first? You will probably need the EIN to get a business bank account set up, in order to pay for the cost of incorporating (forming a corporate entity in your state).
Even if you don't want to set up a corporation, you'll need to get the EIN before you get that bank account (remember, the EIN is free unless you have an attorney get it for you.)
If you made a mistake on your EIN or you submitted the wrong person as the responsible party in item 3, you will need to send in a change request letter to the appropriate IRS location.
If your business changes, you will need to notify the IRS. The process for this notification is explained for various business changes.
All About Your Employer ID Number (EIN)
What is an EIN Used For, How to Apply Online, and How to Make Changes
Every business that has employees must have an employer ID number (EIN), but even if you have no employees, you will probably need to have an EIN as you start your business. The term "Employer ID Number" is something of a misnomer, because even businesses without employees may need an EIN.
An Employer ID Number (EIN) is a number assigned to a business by the IRS to identify the business for purposes of taxation. A business must include its Tax ID on bank account applications, income tax forms, and employment tax reports and payments. A Tax ID for a business serves the same purposes as a Social Security number for an individual.
If you are not sure if you need an EIN, you might want to consider getting one. It doesn't cost anything, and then you will have it if someone asks for it.