All new business owners need to have an Employee Identification Number (EIN) to disclose their tax status with the IRS system. This information is required for businesses to be able to submit tax reports and apply for certain types of licensing and business loans. The IRS issues EINs at no cost to the company. All that is required is that new businesses register with the IRS to obtain an EIN. If you’re wondering “how do I apply for an EIN number?”, keep reading for comprehensive information about the process.
Why do you need an EIN?
As a business owner, it’s vital to have an EIN as it allows the IRS to verify the tax status and specific circumstances of the business. So, what is an EIN? An EIN helps your business disclose some of the following information to the IRS.
- Whether or not the business has employees.
- Under which capacity your business legally operates. I.e. is your business a corporation or a partnership?
- With which cooperatives your business is involved and in what capacity.
- Company pension schemes and employee plans, or plans for the self-employed.
- Whether or not income tax is payable as well as the status of those paid by the employer or business.
If you own a business, an EIN is also a key piece of information for separating income and asset information from your business and your personal status. Having an EIN for your business will assist in legal protection against your personal assets and help to keep your personal and business affairs separate in official capacities.
Vital information you need to get an EIN
To obtain an EIN, there are several pieces of information needed before you apply. If you are a business owner, you will either need to apply for an EIN yourself, or you will elect a business representative to act as the authorized party to obtain an EIN. Keep in mind, this person will have to complete an IRS 2848 form to confirm their status as an authorized representative upon having an EIN obtained.
The authorized representative will also have to confirm they are located in the United States or within one of the United States’ territories to qualify for an EIN. Whoever is responsible for handling IRS affairs on behalf of the business will also need to disclose their Social Security Number or their Individual Taxpayer Identification Number, also known as their ITIN.
Other information required for an EIN includes:
- The legal business name
- The postal and physical address of the business
- The full legal name of the taxpayer and the authorized company representative
- The reason for the EIN application
- The dates on which the business was started or, if applicable, acquired
- The business’s estimated maximum number of employees for the year
- The month in which the business’s accounts close
Once you have your EIN, you need to keep it safe as you will likely need this information as your business grows and you require licensing or business bank loans. It is possible to relocate or verify your EIN with the IRS at a later stage, however this can be a time-consuming process.
4 ways to apply for an EIN
Applying for an EIN is a relatively quick and painless exercise and there are several ways you can do so. To apply for an EIN, simply use one of the following methods.
Apply online
This is by far the quickest and easiest way of getting an EIN for your business. The IRS website has an online system wherein you can complete your EIN application form. Once all the information provided has been verified by the IRS, the applicant will be issued with an EIN immediately.
Apply by mail
If you are not in urgent need of an EIN, you can apply for one via post. Although not as efficient as an online application, it does mean you will receive a hard copy of your EIN confirmation letter to be filed. Authorized parties will be able to get an SS-4 form from the IRS website. Applicants should complete all the necessary information in writing and send the completed form via post to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
The typical turn-around time for EIN applications via mail is four weeks.
Apply through a third party
Third-party applications are useful for those business owners who want to delegate tax relations to someone else on their behalf. This will allow someone other than them to apply for and receive the EIN. The process for this means the taxpayer needs to complete an SS-4 form having correctly filled in the third-party designee section.
The third party must keep a copy of the completed form for their own records to access in the event of any IRS query. Finally, the taxpayer must sign a statement confirming the third-party authorization, a copy of which must also be given to the third party.
Apply by fax
Authorized representatives of a business can also apply for their EIN via fax. To do so, the SS-4 form needs to be downloaded from the IRS website and all the relevant sections completed. The completed form can then be faxed from the business to the IRS via 855-641-6935.
When should you apply for an EIN?
For any tax-related submissions, a business will need to have an EIN. An EIN should be obtained in advance of filing tax returns or making tax deposits.
How long does it take to get your EIN?
The amount of time it takes to get your EIN depends on the application method used and the agreements settled upon within an organization. Applying for an EIN online usually has the quickest turnaround time, with taxpayers being able to get their EIN immediately upon information verification from the IRS.
For businesses that wish to have a third-party representative responsible for taxation affairs, the turnaround time may take slightly longer as there is more information that needs to be registered and confirmed by the IRS. For example, mail applications and third-party applications can take up to four weeks before obtaining an EIN.