Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Employer Identification Number (EIN)

What it is:

An employer identification number (EIN) is a number assigned to businesses by the IRS.

How it works (Example):

 

The EIN is nine digits long, and the format is XX-XXXXXXX. Similar to a Social Security number, the EIN reflects the state in which the company exists, though this rule ceased after 2001.

Companies need to obtain EINs if they have employees, operate as partnerships or corporations, have tax-deferred pension plans, or withhold income taxes for nonresident aliens. Companies that pay ATF taxes or deal with REITs, farms, nonprofit activities or certain trusts may also need EINs.

Companies can apply for EINs online at IRS.gov. Click here for more information.
 

Why it Matters:

An EIN helps the IRS distinguish among different employers. Companies sometimes have to obtain new EINs if their ownership structures change significantly.

EINs are for tax purposes only; they do not replace Social Security numbers, authorize a person to work in the United States, or create eligibility for Social Security or other benefits. EINs are not the same as Taxpayer Identification Numbers (TINs). It’s also important to note that EINs are for federal tax purposes; states may have additional identification requirements.