Do I Need an EIN for My Business?

An EIN or Employer Identification Number, is a nine-digit number assigned to sole proprietors, corporations, partnerships and LLC’s for tax filing and reporting purposes. This is a permanent number issued by the Internal Revenue Service and is how they identify your company. An EIN is also commonly referred to as an FEIN (Federal Employer Identification Number) and FTIN (Federal Taxpayer Identification Number). The question of “Do I need an EIN For My Business?” comes up a lot so here are answers to common questions.

Who Needs an EIN?

• A business with employees
• Hired or will hire employees
• Opening a business bank account
• Applying for business licenses or permits
• Applying for business credit cards
• Changed type of business organization
• Purchased a business (not a stock purchase)
• Withholding taxes for others
• Issuing 1099’s for independent contractors
• Privacy for sole proprietor or single-member LLC

How do I apply for an EIN?

Use Form SS-4 to apply for an EIN. Its not difficult to complete the application, but you may have to read up to 6 pages of detailed instructions, the majority of which would not apply to you. Keep in mind that any errors in completing the application could delay the issuance of your EIN for weeks. If you have any questions, you can get expert help by contacting me for a consultation.

Can I use my EIN to make tax deposits for employees?

If you completed the application correctly and indicated that you will have employees, you will be automatically enrolled in the Electronic Federal Tax Payment System (EFTPS), which allows you to make tax deposits online or by telephone. EFTPS account information arrives separately by mail.

Does a sole proprietor or single-member LLC need an EIN?

Since sole proprietors and single-member LLCs report their business income on their personal returns, they are not required to obtain an EIN unless they have employees or a qualified retirement plan. Although due to privacy concerns it is always a good idea to obtain an EIN. This also helps in establishing a credit history of the business.

Conclusion: Who needs an EIN?

If you are starting a business and do not have an EIN, you can obtain one instantly online. Applying by fax or mail can take several weeks. The information presented in the above article is general in nature, and not warranted or guaranteed. Laws change and each situation is different, so be sure to speak with a Certified Public Accountant or a trusted tax advisor on “Do I need an EIN for My Business?” to ensure it’s done correctly.

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Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, I would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.

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