Setting up a new business is not as easy as it seems to be. It can be a challenging task for newbies. In the US an Employer Identification Number (or EIN) is regarded as corporate version of a social security number. Social security number is called as personal identification of a person whereas EIN is known as business identification which is mandatory for numerous business operations.
This number is also known as a FEIN or Federal Employer Identification Number (and sometimes known as a TIN when used for tax identification). It will be issued to anyone (and that included individuals) who has to pay employees withholding taxes.
Structure Of EIN:
EIN is a nine digit number assigned by the IRS especially for tax identification purpose and is used by business entities, government agencies, trusts and estates, partnerships, non-profit organizations, sole proprietors and employers. The IRS uses the EIN to record the earnings and details of taxpayers who have to pay various taxes for their business. Those individuals who are classed as employers have two options. They can either use their social security number or obtain an EIN when it comes to reporting taxes withheld for their employees. Credit bureaus and credit issuers are able are the best ones to tell you the clear differences between these two numbers.
Application process for obtaining this unique number is very fast and easy. You have to make IRS EIN online application by visiting E-filings. We assist clients during the process for smooth submissions.
History:
Employer Identification Numbers were discovered by the IRS in 1974. The main motive was to ‘acquire taxpayer identification for the purpose of payment of employment taxes.’ The relevant facilitation was first acquired as part of the Tax Code Revision in 1954 and then broadened in 1961.
It was agreed that the physical appearance of EIN would take the form 00–0000000 whilst Social Security Numbers are written as form 000–00–0000. This was made to differentiate between the two easily. Similarly, there are now EIN decoders on the internet that can detect which state a company has been registered in, simply by filling in the EIN associated.
Businesses need Employer Identification Numbers to be make themselves available to pay their employees and to be able to file business tax returns. There are different divisions for business and not all of them needs an EIN.
It is essential to obtain a Employer Identification Number if the business is to be considered a LLC, Partnership, Corporation or S Corporation or a Non-Profit. Any business that does not obtain an Employer Identification Number will be classed as a proprietorship and the Operator or Owner’s Social Security Number will be used on any relevant tax documents.
