If you have a business account and do business in the US, you will need an EIN number to file your tax return. However, this is not always required.
A unique nine digit number provided by the IRS is an employer ID. This is the same social security number but is used instead of individuals to identify organizations or businesses. This ID number allows the IRS to record accurate records even if the entity moves to another address, opens a new location, or changes the brand to a new name. Unless you are self-employed or have a solo employer without an employee and a pension fund, you will probably need an EIN for your business. A CFO India can help.
EIN is the identification number issued for any business that requires submission of documents to the Tax Administration. Self-employed and individual occupations that meet certain requirements do not need an EIN and can use their Social Security number as a birth certificate number.
Which business structures need an EIN?
The EIN helps the IRS identify all entities that provide them with any documentation. It may be a bit misleading to use the term “employer” because the term “employer” is needed because nonprofits need it even if there is no employee on the payroll, and even if it is a federal tax identification number, companies are exempt. Taxes are still needed because they are still required to file annual tax returns.
If you are self-employed or work as a sole proprietorship, you can file a tax return using your Social Security number. However, you still welcome the EIN application as a sole proprietor. If you decide to start your own small business or become a limited liability company, you should get an EIN, even if you still do not have an employee.
The IRS provides a quick checklist to help people find out if their job requires an EIN. For example, if you have an employee, you file an employment tax return, you work as a company or business partner, you are part of a real estate or non-profit organization, you need an EIN. Be sure to see the second page of the SS-4 form for complete information about those who need an EIN.
Who can apply for an EIN?
Note that only the “responsible party” can apply for an Employer Identification Number on behalf of a business entity. In other words, you must be the one who controls, manages, or directs the organization that receives the EIN. The responsible party must share his / her legal name and full SSN in the EIN and will be registered with the IRS as the person in charge of that company or organization. Therefore, a responsible party cannot be a commercial entity; it must be a person.
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When to get an EIN?
Receive an EIN after registering your organization’s statutes at the state level. You can receive an EIN once you have received official confirmation of your company status. Obtaining an EIN is a relatively simple process, and if the form is submitted online, it is almost instantaneous.
It is wise to give yourself enough time to apply for and receive an EIN so that you have no reason to panic at tax time. However, if you are applying for an EIN by e-mail or fax and have not been issued by the tax deadline, the IRS recommends that you write “requested” and the date of your application in the EIN space on the tax form.
