When Do You Need an EIN As An Employee?

Getting an Employer Identification Number (EIN) as an employee is one of the most important tasks that you need to complete as a newly established organisation or a business. Even if you are about to reconstruct your old business, you still need an EIN.

An EIN helps you in legally establishing your firm, applying for a business loan, opening a business bank account, and more. Any organisation, regardless of whether it employs people or not, must have an EIN. You will need an EIN for establishing a family trust, managing an estate, or hiring an employee.

Planning to launch a brand new company? If you plan to hire employees, getting an EIN should be one of your top priorities to get things done in a smooth legal manner.

What is an EIN?

In the tax world, your company is identified by a nine-digit number which is known as an EIN. It’s more like a Social Security number, with the only difference that it’s only for use in professional contexts. EINs are nine-digit identification numbers issued by the IRS.

This important number is generally used for filing payroll tax returns. Federal Tax Identification Numbers are another name given to EINs. They are assigned to a single company and never reused, much like social security numbers.

Criteria for Eligibility

An EIN can only be issued to a U.S.-based company. Also, you as an applicant, must provide your own valid taxpayer identification number (SSN or other) when applying for the number.

EIN vs. FEIN: What’s the Difference?

FEIN stands for Federal Employer Identification Number. It’s equivalent to a state-issued EIN but the only difference is that it comes directly from the federal government. With a FEIN, you can sign up for direct debit payments to pay federal taxes over the phone or online.

Do You Need an EIN?

Yes, you will need an EIN as a brand-new or reconstructed business. The following types of organisations are mandated to get EINs:

• Companies Forming Limited Liability
• Partnerships
• Corporations

In most cases, an EIN is unnecessary for a sole proprietorship.

However, you will need to obtain an EIN if:

• You currently employ others or have plans to hire
• You’re thinking about introducing a Keogh or individual 401(k) plan
• You have inherited a business
• You are planning to purchase one
• You are going to declare bankruptcy

Trusts funded by an estate’s assets and representatives managing an estate’s business operations should also get an EIN, as per the IRS rules.

Those who work as contractors, manage home-based enterprises, freelancers, or participate in the gig economy on the side typically do not need an EIN.

Steps to Get an EIN?

You can get an EIN without paying anything at all!

Applicants who are not physically present in the United States but will conduct business within the US can call, mail, fax, or submit an application electronically. The procedure is very simple and straightforward.

The form, SS-4 Application for Employer Identification Number, can be downloaded from the IRS website and filled out by applicants.

In order to obtain an EIN from the IRS, the applicant must provide the following details:

• Name
• Individual Taxpayer Identification Number (TIN) of the company’s chief officer, partner, trustor, owner, or other titleholder.

You need to provide the following information on the form as a user:

• Type of entity
• Applicants’ Statements of Purpose (change of organisation, new business, IRS withholding requirement compliance)
• Date of inception or purchase
• Typical field of operation

To apply for an EIN online, a company must be physically present in the United States or within a U.S. territory. An EIN is issued instantly after the online application is completed and the data is verified by the authorities.

Why is EIN important?

There are many major benefits of having an EIN. With an EIN number, you can:

1. Put In Your Tax Return

If you need an EIN and don’t have one when you file your taxes, you can get in some serious trouble! It will increase your trustworthiness.

2. Get A Company Bank Account

More and more financial institutions now ask for your EIN in addition to your business license. It is an important step before opening a business checking account. A “doing business as” (DBA) certificate or articles of incorporation may be required, depending on the legal form your company takes.

3. Get A License To Operate A Business

While it’s true that each state has its own requirements, the majority of them will ask for your EIN in order to apply for a company license.

4. Get A Loan From The Bank

A business checking account is a prerequisite for business loan applications at most banks. Your EIN number will majorly help with that.

5. Recruit Workers

If you are going to hire employees, you will need an EIN in order to create a payroll system. You can use a lot of services to find EIN numbers, EINSearch.com offers a great service for this.

Important FAQs:

What Should You Do If You Misplace Your EIN?

If you’ve misplaced your EIN, consult the notice the IRS provided you when it was issued to you. You can also contact the bank where you have your regular accounts to see if they can help you retrieve it. It will also be on any prior tax returns that you have filed. Before contacting a customer service representative, verify that you have all the necessary identification handy.

When Can I Expect an EIN to Be Issued?

An EIN can be obtained instantly when applying online. It may take up to two weeks for the IRS to process an EIN application submitted through fax. Paper applications are also accepted by mail with an expected processing period of four to five weeks from the IRS.

Does EIN stand for “Tax ID”?

The Employer Identification Number (EIN) and the Taxpayer Identification Number (TIN) are interchangeable. Both are 9-digit codes used to identify a company to the IRS.

Is the SSN the same as the employer ID number?

Contrary to a popular belief, an EIN is not the same thing as an SSN. Similar to how individuals are given a nine-digit Social Security Number by the Social Security Administration, businesses are given a nine-digit Employer Identification Number by the Internal Revenue Service.