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What is an EIN and how do you get one?

What is an EIN and how do you get one?

An EIN number is a crucial identifier for businesses to fulfill their US tax obligations, complete financial transactions, and run other basic operations – like hiring employees!

In our experience helping businesses comply with taxes around the world, we’ve learned all about the EIN and how important it is to stay compliant. So we decided to collect our research in one place!

In this post, you’ll learn:

  • What is an EIN?
  • What is an EIN used for?
  • Do you need an EIN number for your business?
  • How to apply for an EIN number
  • What does an EIN look like?
  • Where can you find your EIN number after you apply?
  • What’s the difference between an EIN and a sales tax ID?
  • Next steps after getting an EIN

What is an EIN?

An EIN number is an Employer Identification Number, which is issued by the federal government of the US. It is also known as a Federal Tax Identification number.

In other words, this is a national level registration for businesses, whereas most other tax registration, such as acquiring sales tax permits and actually charging sales tax, are done at the state level.

To get an EIN, businesses can apply online through the IRS website, by mail, fax, or by phone. The specific instructions depend on whether you are located inside the US or somewhere else internationally. More on that in a section below!

What is an EIN used for?

Employer Identification Numbers are federal tax identifiers that the Internal Revenue Service — the US federal tax authority more lovingly known as the IRS — uses to identify your business and to track your business through various systems. An EIN number is legally required for your business to do a variety of things, such as file tax returns, open a business bank account, and even hire employees.

When it comes to taxes, EINs are only used for tax administration at the national level, which includes income tax but not sales tax. As we mentioned above, in the US, sales tax operates on a state and local level. You likely need to provide your EIN when you register for sales tax in a new state, but otherwise it is not involved with sales tax in the US.

What is an EIN for a business and do you need one?

Businesses, partnerships, corporations, non-profit organizations, and other entities are typically required to have an EIN. Sole proprietors may not need an EIN unless they have employees or choose to establish a retirement plan.

According to the US Small Business Administration and the IRS, your business needs an Employer Identification Number if you do any of the following inside the United States:

  • Hire employees

  • Pay employees

  • Apply for credit or a loan

  • Operate as a corporation or partnership

  • File tax returns for employment, excise, or alcohol, tobacco, and firearms

  • Withhold taxes on income, other than wages, paid to a non-resident alien

  • Use a Keogh Plan (a tax-deferred pension plan)

  • Work with certain types of organizations

    • Trusts, except certain grantor-owned revocable trusts and IRAs
    • Estates
    • Real estate mortgage investment conduits
    • Non-profit organizations
    • Farmers' cooperatives
    • Plan administrators

How to apply for an EIN number

Applying for a Federal Tax Identification number is actually quite easy! It’s a free service through the IRS. In fact, the IRS warns that if you come across a site that’s charging you for the application, it might be a scam.

Your application options depend on whether you’re located inside the US (the 50 states and other territories) or abroad. The great news is that this information is provided on the IRS website in English, Spanish, Chinese, Korean, Russian, Vietnamese, and Haitian Creole.

Some information you will likely need to complete your application is:

  • Your business name
  • The name of the company’s principal officer, trustor, owner or related title and their personal taxpayer identification number
  • The type of business entity
  • The reason for the EIN application (such as starting a new business, or changing the business structure or category)

How to get an EIN if your business is based in the US

The first step is to choose who’s responsible. All applications will require the full name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the main owner, or other roles such as the principal officer, general partner, grantor, or trustor. This person will be known as “the responsible party.”

Then you can proceed with one of the following options:

Apply for an EIN online

This is the quickest route, and the route that the IRS prefers. You fill out the online IRS application. Then the information is validated right there on the page, so don’t close any windows! You should receive your federal business tax ID on the spot. It’s a good idea to download the confirmation certificate for your records.

Apply by fax or snail mail

This route is a bit more old school. To apply by fax or mail, you must fill out the Form SS-4. Make sure you fill out all the required information correctly! Any mistakes will prolong the process by weeks or months, since paper processes are slower than digital.

Once the Form SS-4 is complete, you should mail it to the following address:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Or fax it to this number: (855) 641-6935

An application by fax will take about 4 business days, while an application by mail will take about 4 weeks.

How to get an EIN if your business is based outside the US

If you have no primary business location, office, or legal residence in the US, then you’re considered an international business. Unfortunately you don’t have the option to apply online at this time.

Apply by phone

International businesses may call 267-941-1099 (not a toll-free number) to get a federal tax ID. Here are the hours for the phone service:

Monday through Friday
6 am - 11 pm (US Eastern Time)

The person making the call must be authorized to receive the number and answer questions from the Form SS-4.

It’s unclear from the IRS website how long this process lasts, but you can ask the agent helping you on the call.

Apply by fax or snail mail

To apply for EIN by fax or mail might be cheaper than an international phone call, plus you can do it on your own time. To apply by fax or mail, you must fill out the Form SS-4. Make sure all the required information is correct, to ensure the fastest processing time.

Once the Form SS-4 is complete, you should send it to the following:

Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Fax: (855) 215-1627 (from within the US) or (304) 707-9471 (from outside the US)

Again, it’s unclear how long the international application process will take and when you will be assigned your federal tax ID. But generally the IRS says that an application by fax will take about 4 business days, while an application by mail will take about 4 weeks.

What does an EIN number look like?

An Employer Identification Number has 9 digits in the following format: XX-XXXXXXX. The two-digit prefix (XX) is the code that identifies the location or type of business entity. The last 7 digits identify your business in particular. And there is always a hyphen between the two sets.

For example, an EIN might look like: 12-3456789.

Where can you find your EIN number after you apply?

You may be able to find your EIN on a confirmation email from the IRS or previously filed forms, such as taxes or applications.

But if you’ve forgotten, lost or misplaced your number, no worries! Simply call the IRS Business and Specialty Tax Line at (800) 829-4933, and select EIN from the list of options. Once connected with an IRS employee, tell the agent you can't remember it. The IRS employee will ask some security questions, then provide the number to you right there over the phone.

The IRS phone service hours are:

Monday through Friday
7:00 am - 7:00 pm (your local time, from wherever you’re calling in the US)

What’s the difference between an EIN and a state tax ID?

The tax systems on a state level are separate from the federal level. You’ll need a state tax ID to comply with local business tax rules. For instance, you need an EIN for federal income tax, and a state tax ID for state-level income tax (if the place where you live has it… 7 of them don’t!).

This is also a completely separate system from sales tax. Sales tax is a consumption tax that customers pay you when they make a purchase, similar to VAT or GST in other parts of the world. Then you must remit the money to the state government. Yep, US sales tax operates on a more local level, and sales tax rules vary by state.

Next steps after getting an EIN

Once you’re done with the EIN number process, you might need to register for sales tax. Typically you must register your business in the state(s) where you’re located or where you have economic nexus. Once you’ve figured out where you’re liable, you can use our sales tax registration guides by state to apply for a seller’s permit.

When the time comes, Quaderno can help you stay compliant with local sales tax rules and grow your business with peace of mind. Give us a try for free.

Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.