Employer identification numbers (EINs) are federal tax identification numbers assigned by the Internal Revenue Service (IRS) to businesses in the United States. As the name implies, the employer identification number is used by the IRS to identify the tax accounts of certain businesses in much the same way that social security numbers identify individuals. The IRS does not automatically assign employer identification numbers to businesses. Instead, it is the responsibility of certain businesses to apply for, update and terminate their employer identification numbers consistent with IRS requirements.
When do You Need a Federal Employer Identification Number?
Generally, the IRS requires that you obtain a federal employer identification number if any one of the following applies to your business:
- You have employees;
- Your business is a partnership or corporation;
- You are required to file employment, excise, or alcohol, tobacco and firearms tax returns;
- You withhold taxes on income, other than wages, paid to a non-resident alien;
- You have a Keogh Retirement Plan; or
- Your business is involved in any of the following organizations: trusts, IRAs, exempt organization business income tax returns, estates, real estate mortgage investment conduits, non-profit organizations, farmers’ cooperatives or plan administrators.
If you qualify for a federal employer identification number then it is important that you contact your state department of revenue to determine whether you also need a state tax identification number.
How do You Get an Employer Identification Number?
There are several ways to apply for an employer identification number. Businesses may apply online, by mail, by fax or over the telephone.
Most businesses can get employer identification numbers almost instantaneously by applying online during the hours specified by the IRS. In order to apply for an employer identification number online, the business must have its principal place of business in the United States or a U.S. Territory and the business owner must have a valid taxpayer identification number, such as a social security number. An online assistant will help you fill out the questions on an application and you will get your employer identification number at the end of the application.
When do You Need to Make Changes in Your Employer Identification Number?
Most businesses need a new employer identification number when there is a change in business ownership or structure. For example, a sole proprietorship that becomes a partnership will need a new employer identification number. A business that is subject to a bankruptcy proceeding will also need a new employer identification number. However, businesses that simply change names or locations without changing their ownership or structure generally do not need new employer identification numbers.
In the event that you close your business, the IRS will close your business account. Your federal employer identification number will never be reused and if you decide to reopen your business in the future you may be able to use the same employer identification number. You must close your account in writing through the mail or fax in a letter that contains the reason that you are closing the account and your signature.
Employer identification numbers have important tax implications for businesses and qualifying businesses should consult the IRS or a tax attorney for additional information.
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