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A Guide to Employer Identification Numbers

An Employer Identification Number (EIN), also known as a Tax Identification Number (TIN), is a nine digit number used to identify employers

Written By: CompuPay Inc.

An Employer Identification Number (EIN), also known as a Tax Identification Number (TIN), is a nine digit number used to identify employers including sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, household employers and other business entities. It is used by the Internal Revenue Service (IRS) to identify taxpayers required to file business tax returns. Who needs an EIN? There are several questions that need to be taken into consideration in order to determine whether or not a business will need to apply for an EIN. If the answer to any of these questions is yes, the business is required to have an EIN.

  • Does the business have employees?
  • Is the company a corporation or partnership?
  • Does the business file tax returns for employment, excise, alcohol, tobacco, or firearms?
  • Does the company withhold taxes from a non-resident alien on income other than wages?
  • Is the business is involved with the following types of organizations: trusts, except certain grantor-owned revocable trusts, IRAs, business income tax exempt organizations returns, estates, non-profit organizations, farmers' cooperatives, or plan administrators.

Even if the business is operating as a sole proprietor and files taxes through Form 1040, Individual Income Tax Return, it still may be beneficial to obtain an EIN for purposes of identity protection and avoiding the use of a Social Security number. How to apply for an EIN There are several ways to apply for an EIN:

  • Online - Application via Internet at www.irs.gov is the preferred method according to the IRS. The application can be verified directly following completion and the EIN can be issued immediately. Applicants should print out and retain the verification form once the online application has been completed.
  • Toll-free phone service - An EIN can be obtained immediately by calling the IRS Business & Specialty Tax Line at (800) 829-4933, Monday through Friday, 7:00 a.m.-10:00 p.m., local time.
  • Fax - A completed Form SS-4, Application for Employer Identification Number, can be faxed to the IRS, attention EIN Operation, at (859)669-5760. The EIN will be issued and returned via fax within four business days.
  • Mail - A completed Form SS-4 can be mailed to the IRS, attention EIN Operation, Cincinnati, OH 45999, and the EIN will be issued and mailed back. Applicants should expect to receive the mailed copy in four weeks.

When to apply for a new EIN Once a business has obtained an EIN, that number becomes permanent for that entity, whether or not the number is ever used for tax filing. An EIN is never reassigned or reused for another business entity. Although an old EIN is never canceled by the IRS, a business may need to apply for a new EIN if:

  • A sole proprietor is subject to bankruptcy proceedings
  • The ownership or structure of the business changes
  • The corporation receives a new charter, or a new corporation is created after a merger
  • An old partnership end and a new one begins
  • A separate EIN is required if a business is a subsidy of a corporation

A new EIN is not needed if:

  • The business name changes
  • The business is a division of a corporation
  • The company changes or adds location(s)
  • A sole proprietor operates multiple businesses
  • A corporation or partnership declares bankruptcy
  • The surviving corporation in a merger uses its existing EIN
  • A corporate reorganization changes only the identity or place

Although the business is not required to obtain a new EIN for a name change or doing business as (DBA) change, the business' existing EIN can be transferred to the new business name. The business owner, corporate officer or partner can sign a letter that informs the IRS of the name change and includes the old and new business names, the EIN and mailing address. The letter should be mailed to the IRS address to which the business sends its tax return. An EIN is required for certain business types to file tax returns with the IRS. Many businesses and financial institutions will also require an EIN before they will work with other entities. New businesses in need of an EIN should apply for a number via the methods outlined above. For further information regarding EINs, please visit www.irs.gov.

Sources: Ellen, Steph. "How to Transfer an EIN Number." www.eHow.com. eHow, Inc. 27 May 2010. Web. 22 September 2010. "Do You Need an EIN?" www.smallbusinessnotes.com. Small Business Notes. n.d. Web. 22 September 2010. "Employer ID Numbers (EINs)." www.irs.gov. Internal Revenue Service. 5 August 2010. Web. 15 September 2010.

CompuPay is one of the leading payroll, tax filing and HR-related service providers in the country. Since 1980, we have established relationships with thousands of accounting professionals, allowing them to better attract, serve and retain business clients. CompuPay is not a legal advisor and makes no claims as such. For legal advice, please seek legal council.

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