An Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify a business entity for tax purposes. It is also known as a Federal Tax Identification Number.
Your business needs an EIN if it has employees, operates as a partnership or corporation, or files certain tax returns.
Some of the reasons why your business needs an EIN are:
- Employee payroll and tax reporting: If your business has employees, you need an EIN to report employee wages and taxes to the IRS.
- Business taxes: Your business may be required to file various tax returns, such as income tax, excise tax, or employment tax returns, and an EIN is needed to identify your business on these returns.
- Opening a business bank account: Banks generally require an EIN to open a business bank account.
- Applying for business licenses and permits: Many states and local governments require businesses to have an EIN when applying for business licenses and permits.
- Legal structure: If your business is structured as a corporation or partnership, it is required to have an EIN.
Obtaining an EIN is a relatively simple process and can be done online through the IRS website. Once you have an EIN, it is important to use it consistently on all your tax and business-related forms and documents.