If you’ve already been required to provide EIN in one situation or two, this article is not what you need right now. However, what you should immediately do is to fax SS4 Form to IRS to apply for EIN since it’s unavoidable to give it out when you’re required to.
If you haven’t had EIN but usually hear about it, it’s of high necessity to read this article below because it’s dramatically possible for you to give out EIN.
What is EIN?
Short for Employer Identification Number, an EIN is used by employers, corporations, partnerships, trusts, estates, churches, government agencies, Indian tribal entities, certain individuals, and others. An EIN is a 9-digit number with a hyphen like 12-3456789.
An EIN is usually required by different entities or organizations for different purposes. For example, for sole proprietors, an EIN is required to be given out for employee hiring, a Keogh or Solo 401(k) retirement plan, existing business buying or inheriting, or bankruptcy filing.
How Necessary is an EIN?
Even if an EIN is not required right now, it’s also necessary to get it for the leading two reasons below.
Avoid Identity Theft
EIN plays a role in the unique identification of your corporation as an employer. If an EIN isn’t applied, your social security number should be given instead to label your unique identity. However, that’ll add risk to your identity theft. If an EIN is held, however, an EIN can be provided to protect your private social security number.
Boost Business
An EIN is beneficial to let you communicate with your potential customers with the identification as a sole proprietor that is more attractive and reliable than what you describe.
How to Confirm You Need an EIN?
If you have no idea whether an EIN is needed, the following questions should be answered and if all the questions are actively answered, that is, answered with “YES”, it’s confirmed that you DO need an EIN.
- Question 1. Do you have employees?
- Question 2. Do you run your business as a corporation or a partnership?
- Question 3. Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco, and Firearms?
- Question 4. Do you withhold taxes on income, other than wages, paid to a non-resident alien?
- Question 5. Do you have a Keogh plan?
- Question 6. Are you involved with ANY of the following types of organizations?
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
To clearly and quickly confirm you need an EIN, the following items should be met.
- Have employees
- Run a business as a corporation or a partnership
- Have filed for tax returns on employment, excise, alcohol, tobacco, or firearms
- Have withheld taxes on income, other than wages, paid to a non-resident alien
- Have a Keogh plan
- Involved with any of the types of organizations
- Trusts (except certain grantor-owned revocable trusts)
- IRAs
- Exempt Organization Business Income Tax Returns
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators