When starting a small business, it is important to understand your legal rights and obligations. One of these obligations is applying for and receiving your Employer Identification Number (EIN).
Let’s review what an EIN is, why you may need one, and how long it will take to apply.
What Is An EIN?
EIN is an acronym that stands for “Employer Identification Number,” and it is a unique nine-digit number used to identify a business for tax purposes (much like how a social security number is used for an individual) through the Internal Revenue Service (IRS). An EIN goes by more than one name, and you may also have heard it referred to as a “Tax ID number” or “Federal Employer Identification Number”. Receiving your EIN is a free service through the IRS that takes little time to go through.
Why Is An EIN Necessary?
As a business, you will need to pay taxes, and having an EIN is used for this process, but all businesses don’t require one.
The criteria that determine whether an EIN is necessary includes:
- You have employees
- You operate your business as a corporation or a partnership
- You withhold taxes other than wages paid to a non-resident alien
- You file tax returns on the following items: firearms, tobacco, alcohol, employment, or excise
- You have a Keogh plan
- Your business is involved with organizations like trusts, estates, real estate mortgage investment conduits, non-profit organizations, farmer’s cooperatives, or plan administrators.
A sole proprietorship or single-member Limited Liability Company without any employees is not required to have an EIN. Instead, they will use the owner’s social security number or Individual Taxpayer Identification Number (ITIN)
Related: What are the difference between the ITIN, SSN & EIN?
How Long Will It Take to Get an EIN?
One benefit when applying for your EIN with the online application is that once you’ve completed it, you receive your number immediately. It can take up to 10 business days to receive your number if done by fax and four weeks by post.
It takes about two weeks for the EIN to be permanently registered in the IRS system so business owners must wait until it is in the system to be able to use it for the following purposes:
- Filing an electronic return or an electronic payment
- Passing an IRS Tax Identification Number matching program
How Long is an EIN Good For?
An EIN is permanent and never expires. You will require a new one for instances where you are incorporating or becoming a partnership, however.
How Do I Apply for an EIN?
The EIN application process is pretty straightforward and there are a few options a business can choose from:
This is the quickest way to obtain an EIN number; once you fill out the online EIN application on the IRS website, you should be able to obtain an EIN number immediately.
Even though the application is online, you can only apply Monday – Friday from 7am – 10pm EST.
Apply by Fax
You will need to fill out IRS Form SS-4 and choose your applicable state. It is recommended that you send a return fax number for a standard processing time of one week. If you do not add a return fax number, this process could take up to two weeks.
Applications can be faxed to the following number: (855) 641-6935.
Apply by Mail
If applying by mail, this process can take up to 4 weeks. You would submit your application to the following mailing address:
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Related: How to apply for an EIN without a SSN
Reasons an EIN is Denied
There are a few reasons as to why you may be denied an EIN:
- Entity Name conflict – If there is another business with the same name in the same state, you may be denied an EIN, or the processing may be delayed. If you receive a Reference 101 Error when applying for an EIN, this means there is a business name conflict.
- Responsible Party – Only one EIN can be registered per responsible party per day.
- Incomplete Application / Typo – If the application isn’t complete or there are typos, the application may be returned.
- Existing EIN – Only one EIN can be issued to a business, and that number stays with that business unless the business entity changes or ownership changes.
After applying for the EIN, the IRS will send Form CP-575, EIN Confirmation Letter. Be sure to keep this form as it will be used as verification to open a business bank account, and obtain a merchant processing account among other things.