- October 26, 2020
EIN- Employer Identification Number is a unique 9 digit number that helps in identifying the business for the purpose of taxation. This EIN is issued by the IRS for the businesses. Every business owner even if it is a small business, is expected to open a business bank account, get business licenses, and file their respective tax returns.
While implementing the above process, there will be no delays in obtaining the licenses or financing to operate the business.
What is an EIN?
An EIN is required by any business that has employees to serve them. EIN is also required when the business is operated as a partnership or corporation.
Are you confused about whether you need to apply for the EIN or not? Then check the link from IRS. If any of the answers for the given questions in the link is “yes” then you must apply for a new EIN.
How to Apply for an EIN?
As a business owner, you can apply for the EIN very easily; to do that, you can simply go to the IRS EIN Assistant online link. Just fill the required information in the EIN Assistant link, complete, validate, and submit to the IRS. On successful completion, you can receive the EIN at no charge for the service.
The EIN can also be requested through mail or fax. When you operate your business outside the U.S. you cannot apply EIN through this method. Instead, you can place a call at 267-941-1099, from 6 a.m. to 11 p.m. Monday to Friday.
When you need an EIN?
According to the IRS, when any one of the following criteria matches with your business model, then your business should need an EIN:
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- When the business has employees
- When the business or the company you own is a corporation or a partnership.
- When you have filed the tax returns for the following: employment, firearms, excise, tobacco, or alcohol.
- You reserve the taxes towards the income paid to a non-resident alien.
- Trusts, estates, grantor-owned revocable trusts, or IRAs.
- Farmer’s cooperatives.
- on-profit organization.
- Plan administrators.
- Real estate mortgage investment channels.
- The business owner also needs the EIN for the following purposes:
- To open a business bank account.
- For applying credit cards for the purpose of your business.
- For applying for business permits.
- To obtain a business loan or business license.
- Provide non-dependent contractors with Form 1099.
- Another important reason, why you need an EIN is to maintain your privacy. When you are working with a huge number of clients, exposing your SSN (Social Security Number) can lead to identity theft. You can avoid that by using the EIN.
- When you no need an EIN?
- According to the IRS, there are few cases where you no need an EIN. You no need a new EIN:
- When there is a change in name of a small business.
- When your partnership or corporation is bankrupted.
- When the corporation is taxed as S corporation.
- When there is a change in the business entity that is taxed on Form 8832.
- When there is a change in the business location.
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The key point to remember is that obtain an EIN before you establish a new business, even if it is small. By doing so, it assists in financial and legal matters.
