HR Glossary  /  Employee Identification Number (EIN)
Employee Identification Number (EIN)5 min read
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What is an Employee Identification Number (EIN)?

An Employee Identification Number (EIN) is a unique nine-digit number issued by the IRS to identify businesses for tax purposes. Similar to how individuals use Social Security Numbers (SSN), business entities use EINs to manage tax filings, payroll, and other legal obligations. Any business with employees, corporations, nonprofits, and other entities must have an EIN to ensure compliance with federal regulations. This guide covers what an EIN is, why it’s essential, and how to obtain and protect it.

An Employee Identification Number (EIN), sometimes referred to as a Federal Employer Identification Number (FEIN), Federal Tax Identification Number, or Taxpayer Identification Number (TIN), is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify businesses for tax purposes. Just as individuals use a Social Security Number (SSN) for personal tax reporting, businesses use an EIN to manage their tax responsibilities, file returns, and communicate with various government agencies.

For businesses, nonprofits, and certain other organizations, having an EIN is essential for tax reporting, payroll management, and compliance with federal and state regulations. According to the IRS, an EIN is required for:

  • Businesses with employees
  • Corporations and partnerships
  • Nonprofit organizations
  • Trusts and estates that are subject to income tax
  • Farmers’ cooperatives
  • Entities involved with retirement plans

Even sole proprietors may need an EIN if they hire employees, form a partnership, or operate a business that requires federal tax filings.

Why the IRS Issues EINs

The IRS issues EINs to simplify the process of managing tax responsibilities for businesses and other entities. Without a centralized identification system like EINs, it would be challenging for the IRS to track tax filings, payroll taxes, and federal tax returns for businesses across the country.

It is important to note that the responsible person applying for an EIN must be an individual and not an entity, with the exception of a government entity.

Key Purposes of EIN in Identifying Businesses for Tax Reporting

The primary purpose of an EIN is to help businesses comply with their tax obligations. An EIN is used for:

  • Filing federal and state taxes, including various business tax returns
  • Reporting payroll taxes to the IRS
  • Opening business bank accounts
  • Applying for business permits and licenses
  • Registering with government agencies

Tax Reporting and Compliance: An EIN is necessary for filing various business tax returns and managing a company’s payroll. Whether your business is a large corporation, a nonprofit organization, or a small startup, you’ll need an EIN to submit various federal tax forms, including Form 941 (Employer’s Quarterly Federal Tax Return) and Form 940 (Annual Federal Unemployment Tax Return).

Employer Responsibilities: Any business with employees must have an EIN. Employers use this number to report employee wages to the IRS, withhold taxes, and pay Social Security and Medicare contributions on behalf of employees. The EIN is also used to file unemployment taxes and comply with payroll regulations.

Registering for Business Licenses and Permits: Many state and local governments require businesses to provide their EIN when applying for licenses and permits. For example, businesses in industries like food services, retail, or healthcare often need a specific license to operate legally. An EIN is typically necessary for these registrations.

Applying for an EIN is a straightforward process. The IRS offers several methods to apply:

  • Online Application: The quickest way to apply for an EIN is through the IRS’s EIN Assistant on its website. The system verifies the information and issues the EIN immediately. The EIN, also known as a Federal Tax ID Number, is issued immediately upon verification of the information.
  • Mail or Fax: Alternatively, businesses can fill out Form SS-4, the IRS’s application for an EIN, and submit it by mail or fax. The processing time is typically four to five weeks for mailed applications, and about a week for faxed ones.
  • By Phone: For businesses that are located outside the U.S., the IRS allows applications over the phone. Applicants must provide the required information from Form SS-4 when calling.

Any entity that qualifies as a business, nonprofit, or trust under federal tax law can apply for an EIN. The primary eligibility requirement is that the applicant must have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) for the person applying on behalf of the business.

If you’ve lost your EIN, there are a few ways to retrieve it:

  • Check Your Previous Tax Returns: Your EIN should be on any previously filed tax returns, payroll documents, or bank applications.
  • Contact the IRS: The IRS has a Business & Specialty Tax Line where you can request your EIN if you’re the authorized person for the business.
  • Ensure that your business address is up-to-date with the IRS, as they may send important correspondence regarding your EIN to this address.

How to Look Up the EIN of Another Business

In some cases, businesses or individuals may need to look up the EIN of another company. Publicly available EINs can sometimes be found on government databases or through paid business information services.

Safeguarding Your EIN for Security Purposes

An EIN is a crucial piece of business information, and like a personal SSN, it must be safeguarded. Businesses should take steps to protect their EIN from fraud or unauthorized use, including limiting who has access to the number and keeping it secure with other sensitive information.

EIN (Employer Identification Number): An EIN is used for business tax reporting, payroll, and other organizational financial needs.

SSN (Social Security Number): An SSN is issued to U.S. citizens and eligible residents for personal tax identification and benefits.

ITIN (Individual Taxpayer Identification Number): An ITIN is used by individuals who are required to pay taxes in the U.S. but are not eligible for an SSN, such as foreign nationals.

Businesses must be careful to use the correct identification number for the corresponding tax filing or registration process. Mixing up an EIN with an SSN or ITIN can lead to tax errors, delays, or penalties.

Common Errors When Applying for or Using an EIN

  • Applying for Multiple EINs Unnecessarily: Some businesses mistakenly apply for a new EIN when they don’t need to. A new EIN is only required in specific cases, such as when a business changes structure (e.g., from a sole proprietorship to a corporation).
  • Incorrectly Using an SSN Instead of an EIN: Small business owners sometimes use their SSN instead of their EIN when filing business taxes, which can create confusion and lead to errors.

It’s important to understand that an EIN is different from a state tax ID number. Businesses may need both, depending on the state’s tax regulations. Ensuring clarity between these numbers will help businesses avoid filing errors.

  1. How can I apply for an EIN? You can apply online through the IRS website, or by submitting Form SS-4 via mail or fax.
  2. Can I use my EIN for both federal and state tax filings? Yes, but depending on your state's tax laws, you may also need a state tax ID number.
  3. Is an EIN mandatory for opening a business bank account? Most banks require an EIN to open a business account, especially for corporations, LLCs, and partnerships.

An Employee Identification Number (EIN) is a critical part of running a business in the U.S. It’s not only used for tax reporting but also required for hiring employees, applying for licenses, and conducting key business activities. Whether you’re just starting a business or expanding one, securing your EIN is a step you can’t skip.

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