Employer Identification Number

The Employer Identification Number (EIN), also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification. When the number is used for identification rather than employment tax reporting, it is usually referred to as a Taxpayer Identification Number (TIN), and when used for the purposes of reporting employment taxes, it is usually referred to as an EIN.[1] These numbers are used for tax administration and must not be used for any other purpose. For example, the EIN should not be used in tax lien auction or sales, lotteries, etc.[2]

Comparison to Social Security numbersEdit

Similar in purpose to the Social Security number assigned to individuals, EINs are used by employers, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain individuals and other business entities. The IRS uses this number to identify taxpayers that are required to file various business tax returns. Individuals who are employers may choose to either obtain an EIN or use their Social Security number for the purpose of reporting taxes withheld on behalf of their employees. Contrary to some misconceptions, credit bureaus and credit issuers can tell the difference between SSNs and EINs. SSNs can be validated as to origin and state/year of issuance. The credit bureaus and issuers are highly trained in fraud detection, and increasingly sophisticated algorithms and protections are used. This is why the EIN is not considered sensitive information and is freely distributed by many businesses by way of publications and the internet.

EIN formatEdit

The EIN system was created by the IRS in 1974 by Treasury Decision (TD) 7306, 39 Fed. Reg. 9946. The authority for EIN's is derived from 26 USC 6011(b), requiring taxpayer identification for the purpose of payment of employment taxes. The provision was first enacted as part of the revision of the Tax Code in 1954. This authority was broadened in 1961 by 26 USC 6109. An EIN is usually written in form 00-0000000 whereas a Social Security Number is usually written in the form 000-00-0000 in order to differentiate between the two. There are EIN Decoders on the web that can identify in what state the company registered the EIN.[3][4]

A business needs an EIN in order to pay employees and to file business tax returns. To be considered a Partnership, LLC, Corporation, S Corporation, Non-profit, etc. a business must obtain an EIN. Those businesses that do not are considered proprietorships and the Owner / Operator SSN is used on any tax documents. Also, financial institutions such as banks, credit unions, and brokerage houses will not open an account for a corporation without an EIN. Since all corporations - including ones with no income - must file at least a federal income tax return, a corporation operating or incorporated in the United States generally must obtain an EIN anyway either before or after being issued its charter.

Before 2001, the first two digits of an EIN (the EIN Prefix) indicated the business was located in a particular geographic area. In 2001, EIN assignment was centralized at three of the IRS campuses, although all 10 campuses can assign an EIN, if necessary.[5]

Campus Code
Andover 10, 12
Atlanta 60, 67
Austin 50, 53
Brookhaven 01, 02, 03, 04, 05, 06, 11, 13, 14, 16, 21, 22, 23, 25, 34, 51, 52, 54, 55, 56, 57, 58, 59, 65
Cincinnati 30, 32, 35, 36, 37, 38, 61
Fresno 15, 24
Kansas City 40, 44
Memphis 94, 95
Ogden 80, 90
Philadelphia 33, 39, 41, 42, 43, 48, 62, 63, 64, 66, 68, 71, 72, 73, 74, 75, 76, 77, 82, 83, 84, 85, 86, 87, 88, 91, 92, 93, 98, 99
Internet 20, 26, 27, 45, 46, 47, 81
Small Business Administration (SBA) 31

Tax-exempt, charitable, non-profit organizations, and EINsEdit

The issuance of an EIN to a non-profit organization is separate and distinct from the organization's actually obtaining tax-exempt status from the IRS. Each chapter of a national non-profit organization must have its own EIN, but the central organization may file for a group tax exemption. Before donating monies to a charity, it is advisable to verify its proper registration and IRS Form 990 tax-exempt status. The entire database is searchable, and one can verify an entity's registration, status, and assets and liabilities registered in private databases.

Before applying for an EIN, it is always preferred to check whether the affected organization has been formed legally or not. Almost all organizations that apply for EINs can have their tax-exempt status automatically revoked if they have failed to file a necessary return or notice for a period of three years consecutively. Such a three-year period begins when the organization is legally formed; it is best to form the organization legally before applying for an EIN.[6]

EIN expiration/cancellationEdit

EINs do not expire. Once an EIN has been issued to an entity, it will not be reissued.

An EIN is for life, and it will stay with your business unless you cancel it or change it for specific reasons.[7] However, there are many instances where you might need to change your EIN number. You might purchase another business or your business might become a subsidiary of another, both of which require a new EIN. You may also need to change your EIN if there are changes to the ownership structure or if you are a sole proprietorship subject to bankruptcy proceedings.If you change your location or business name, remember that you don’t need to get a new EIN. But you will still have to report these changes to the IRS. You can report a change of business address with an IRS Form 8822B. If you are changing your business structure, you can file an IRS Form 8832.

A new EIN will automatically replace your old EIN, so you don’t have to cancel/deactivate it. Technically, you don’t really cancel an EIN. What happens is that you close your account with the IRS. You might do this if you closed your business or you never got started. But you can ‘reopen’ this account with its EIN. The same EIN number is never given to another business entity – they are all unique. If you open a separate business enterprise, then you will need a unique EIN unless they are merged together into one distinct legal entity.

See alsoEdit

ReferencesEdit

  1. ^ "Understanding your EIN" (PDF). Internal Revenue Service. 2014. p. 2. Archived (PDF) from the original on March 18, 2021.
  2. ^ "Apply for an Employer Identification Number (EIN) Online". Retrieved 2015-03-23.
  3. ^ "How Do I Find an EIN?". SBA.gov. 2011-06-17. Retrieved 2013-01-02.
  4. ^ "KnowX FEIN search". KnowX.com. Retrieved 2013-01-02.
  5. ^ "How EINs are Assigned and Valid EIN Prefixes". Internal Revenue Service. January 20, 2021. Archived from the original on March 19, 2021. Retrieved April 23, 2021.
  6. ^ EIN, Retrieved 13 July 2015.
  7. ^ "EIN Lookup: How to Get Your Own & other's EINs". Retrieved 2021-04-25.

External linksEdit