Definition
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify business entities and other organizations for tax purposes. Entities that typically require an EIN include partnerships, corporations, estates, trusts, and other non-individual entities.
Examples
- Corporations: XYZ Inc. needs an EIN to file federal tax returns, open a business bank account, apply for business licenses, and to report employment taxes.
- Partnerships: ABC Partnership must obtain an EIN to meet federal tax filing requirements and to operate legally within its jurisdiction.
- Estates: The Estate of John Doe is required to get an EIN for managing and distributing assets as per the deceased’s will, and for filing estate taxes.
- Trusts: A Family Trust needs an EIN to manage its holdings and to comply with federal tax regulations.
Frequently Asked Questions
How do I apply for an EIN?
You can apply for an EIN online through the IRS website, by mail, fax, or phone. It’s a straightforward process and typically takes only a few minutes online.
Who needs an EIN?
Any business entity that has employees, operates as a corporation or partnership, or files employment, excise, or Alcohol, Tobacco, and Firearms tax returns needs an EIN. Additionally, trusts, estates, and certain non-profits may also require an EIN.
Can I use my Social Security Number (SSN) in place of an EIN?
No, an SSN is used for individual taxpayers, while an EIN is specifically for business entities and other organizations that need to be identified for tax reporting purposes.
Is there a fee to apply for an EIN?
No, applying for an EIN through the IRS is free.
How long does it take to receive an EIN?
If you apply online, you typically receive your EIN immediately after completing the application. Applications by mail might take up to 4 weeks.
Related Terms
- Taxpayer Identification Number (TIN): A general term for any type of taxpayer number issued by the IRS, including SSNs, ITINs, and EINs.
- Individual Taxpayer Identification Number (ITIN): A number issued by the IRS to individuals who need to pay taxes but are not eligible for a Social Security Number.
- Corporation: A legal entity that is separate and distinct from its owners, able to have its own assets, liabilities, and responsibilities.
- Partnership: A business operated by two or more individuals or entities sharing profits and losses according to a partnership agreement.
- Trust: A fiduciary arrangement allowing a third party, or trustee, to hold assets on behalf of beneficiaries.
Online Resources
Suggested Books for Further Studies
- “Tax Savvy for Small Business” by Frederick W. Daily - An excellent resource on tax issues for small businesses.
- “The Small Business Start-Up Kit” by Peri Pakroo - A step-by-step guide to starting and growing your small business, including obtaining an EIN.
- “Tax Planning For Trusts and Estates: Federal, State, and Probate Taxation” by Michael J. Jones - A comprehensive guide focusing on tax issues related to trusts and estates.
Fundamentals of Employer Identification Number (EIN): Taxation Basics Quiz
Thank you for taking the time to learn about Employer Identification Numbers (EINs) and for challenging yourself with our quiz. Keep growing your business acumen!
