An EIN, a type of federal tax ID number, is essentially a Social Security Number for a business.
An employer identification number, or EIN, is a unique, nine-digit number issued by the IRS, and is used to identify a business entity for tax purposes. An EIN is also commonly referred to as a federal taxpayer ID number (TIN) or a federal employer identification number (FEIN).
EIN vs. federal tax ID vs. TIN
While EIN, federal tax ID, and other identification terms are often used interchangeably, there are subtle differentiations in their meaning.
The IRS uses taxpayer ID numbers (TINs) to manage, apply, and enforce tax laws. An EIN is one type of TIN used by the IRS. A social security number is another. For example, single-member LLC and a sole proprietorship both have the option of obtaining an EIN or using the owner’s SSN when filing a tax return.
An EIN is also frequently referred to as a federal tax ID. This helps to distinguish it from state-issued tax ID numbers. (Adding to the confusion are states that issue their own employer identification numbers. California is an example of a state that issues a “state employer identification number” or SEIN.)
When do I need an EIN?
Many businesses will need to obtain an EIN. An EIN is required if your business meets any of the following criteria:
- You have employees
- Your business operates as a corporation or a partnership
- You file tax returns for employment, excise, or alcohol, tobacco, and firearms
- You withhold taxes on income, other than wages, paid to a non-resident alien
- You use a Keogh Plan (a tax-deferred pension plan)
- Your business works with certain types of organizations such as trusts, estates, or nonprofits
Along with tax reporting, banks and financial institutions require their clients to have an EIN to open a business bank account. Vendors may also require that your business provide an EIN to pay any of your invoices.
*Note: An LLC with more than one owner must obtain an EIN since it is operating as either a partnership or a corporation. The IRS defines a multi-member LLC as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation.
Single-member LLCs (an LLC with one owner) and sole proprietorships are not required to obtain an EIN unless they meet one of the criteria listed in the previous section. For example, a business with at least one employee is required to have an EIN.
Even if your business is not required to have an EIN, there are benefits to having an EIN. These include helping to keep your personal and business finances separate and to discourage personal identity theft. If you are a single-member LLC or a sole proprietor, you can operate your business using your Social Security Number. But remember, for tax purposes your number will be shared with clients, partners, vendors, tax agencies, and others, creating potential privacy and identity theft concerns. Using an EIN can reduce the risk of exposing your SSN to unauthorized parties.
Related: Do I need an EIN for my LLC?
How do I get a federal tax ID/EIN?
Before applying for an EIN, a domestic business will need the name and the taxpayer identification number (TIN) of the “responsible party”. A responsible party controls, manages, or directs the business entity and the disposition of its funds and assets. For example, a responsible party can be a principal officer, general partners, owner, grantor, or trustor. The responsible party’s TIN can be a Social Security Number, individual taxpayer identification number (ITIN), or EIN.
There are several ways to obtain an EIN. EIN applications can be made online or by mail or fax.
- Online: Once you complete your request and the information provided is validated, an EIN is issued immediately.
- Mail: Complete Form SS-4 and mail it to the address on the “Where to File or Fax” section on Form SS-4. Processing time for an EIN via mail is approximately four weeks.
- Fax: You can also fax a completed Form SS-4 to the listed fax number on Form SS-4. You can elect to receive your EIN notification via fax. The process takes about four business days.
If you are an international application, you must apply for an EIN by phone. The individual who makes the call must be authorized to receive the EIN and address any questions about the information provided on Form SS-4.
You can also obtain an EIN by using a service provider.
Federal tax ID/EIN FAQs
Is an EIN and a state tax ID the same thing?
A state tax ID and a federal EIN are two different types of numbers that can be used to identify a business.
A federal EIN is used to identify your business for both federal and state tax reporting purposes. The EIN is issued by the IRS and can be used in all states in which you operate.
A state tax ID, also known as a state tax registration, is assigned by a state entity, and is used to identify a business for various state tax purposes. However, a state tax ID is specific to the issuing state. If you expand into other states, you may need to obtain state tax ID numbers in each state where you operate.
Is an EIN the same as a TIN?
TIN, which stands for taxpayer identification number, is an identification number used by the IRS in the administration of tax laws.
An EIN (also referred to as a federal tax ID) is a type of TIN. Other types of TIN include the Social Security Number, individual taxpayer identification number (ITIN), taxpayer identification number for pending U.S. adoptions (ATIN), and preparer taxpayer identification number (PTIN).
How do I obtain an individual tax identification number (ITIN)?
If you do not have a Social Security Number, you must have an ITIN to apply for an EIN. To obtain an ITIN from the IRS, complete and mail IRS Form W-7. You can get started by printing Form W-7 and the instruction sheet.
Can I reuse the federal tax ID number (EIN) from my sole proprietorship?
If you change your business structure or ownership, generally you will need a new EIN. For example, if you are a sole proprietor and decide to form an LLC or corporation, you must obtain a new EIN for your LLC or corporation.
Can I use the same EIN for multiple businesses?
You may be able to use one EIN for multiple business locations, but you should have only one EIN for the same business entity.
For example, if you operate a landscaping business and wish to expand to other locations, you are not required to get a new EIN. But if you want to form another LLC (say for a different type of services company, like a pool installation company), you will need to obtain another EIN for that business.
Is there a limit on EINs?
The IRS allows you to obtain multiple EINs. However, the IRS will issue only one EIN per responsible party per day. If your business set up involves multiple entities, you will need to allot extra time for obtaining your EINs or use a service provider.
