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All You Need to Know About the Employer Identification Number

The days of business planning, incorporation and start-up pains are over. Everything is set for you to start off your new business. Just when you think all the paperwork is done, the Employer Identification Number stares you in the face. What is it? Well, you know that any business entity is required to file tax returns every year. Will your Social Security number suffice for that? Not quite. Unless you are the only person working in the business, you need to get an identification number for your enterprise. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification. When the number is used only for identification, it is usually referred to as Tax Identification Number (TIN) and when used for the purposes of reporting employment taxes, it is known as Employer Identification Number (EIN).

So, it’s clear that all new businesses need to obtain an EIN. The only exception is for sole proprietorships which do not have any other employees. However, it is a good idea even for sole proprietors to obtain an EIN, so that they can use it instead of their personal Social Security number on bank accounts and legal paperwork.

Confused? We’ll make it easier for you. You need an EIN:

1. When you have employees in your company

2. When you purchase an ongoing business

3. When you change your organization type – for example from a sole proprietorship to partnership or corporation

4. When want to hold different accounts in your bank and use EINs for your business and Social Security number for your personal accounts

5. When you have a qualified retirement plan

6. When you file any of these tax returns:

o employment

o excise

o alcohol, tobacco and firearms

The EIN is specific to a particular business and you cannot transfer it if you sell or otherwise divest your company. It is very much like your Social Security number which is specific to each individual, and is usually written in the form 00-0000000.

To obtain an EIN for your company, you have to file Form SS-4, which is the prescribed application format, with the Internal Revenue Service (IRS). The forms are available at all IRS and Social Security offices. You can apply for it over phone, fax, mail or online. There is no application fee but the form can take several weeks to process depending on how you ask for it. You may also have to apply for a state EIN in states that charge their own income tax.

If you do not have your EIN by the time a return is due, write “Applied for” and the date of the application in the space shown for the number. Do not use your social security number in place of your EIN.

With that out of the way, you are truly set to be in business!

Small Business: Employer Identification Number (ASL, Captions & Voice Over)

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