Before you incorporated your business, chances are the only time you saw the Federal Employer Identification Number (FEIN or EIN) is when you received a W2 tax form from your employer and you thought little about it. Now that you are a business owner, you need to have an EIN of your own.
What is EIN, and why does your business need it?
The EIN is a nine-digit number assigned to a business by the internal revenue service to identify your business mainly for tax purposes. You can say it’s the Social Security Number (SSN) for businesses.
You might be wondering why can’t you use the SNN if you are a contractor or small business owner, right? Well, the reason for this is because, with the SNN, you can’t separate your personal and business finances.
Other benefits that come with having an EIN include:
Boosts credibility: When you are in business, you need to appear as legit as possible, and the EIN can help with this. As you are transacting and give your clients your EIN instead of your SNN, you appear more serious, responsible, and committed to the business, which increases your chances of getting more business.
Hire employees: When you have employees in your business, you need to create a payroll system, and you can’t create it without an EIN.
Get a business bank account: It goes without saying that you will need an EIN to open a business bank account and the appropriate business license to show that you are allowed to operate in the area.
Get a loan: If you are interested in a business loan, you have to take it from your business bank account to open it using an EIN.
Applying for a business license: Although this varies from one state to another, most states will require you to get an EIN before you are allowed to operate in the area.
Filing your taxes: The EIN is your business identifying number, and you can’t file for tax returns without it. And when you fail to file returns, you get penalized.
Does my business need to have an EIN?
Although the EIN is mandatory for certain businesses, it’s optional for others. You should get an EIN if you answer YES to any of the following questions:
- Do you have employees?
- Do you operate as a partnership or corporation?
- Do you file tobacco, excise, employment, and firearms returns?
- Do you have a Keogh plan?
- Do you withhold taxes on income?
- Are you involved in any of the following?: estates, trusts, farmer’s cooperatives, nonprofit organizations, plan administrators, and real estate mortgage investment conduits?
All corporations must have an EIN. This includes corporations formed as holding companies without the intent to do business.
How to apply for an EIN
The beauty of applying for EIN is that it’s simple and free. You can apply for the number in three main ways: online, fax, and snail-mail. If you are abroad, you can apply via phone by contacting the IRS. To know more about applying for the number, visit the IRS site.
Before you apply for the number, ensure you have all the necessary documents to have a smooth process. They include:
- The trade name of your business
- Your name
- Mailing address
- Street address
- Name of the responsible party
- The county and state where your business is based
- Type of business you are operating
- Reason for your application
- The date you started your business
- The number of employees you expect to have in the next 12 months
- The principal line of products or services you provide
How to look up your EIN
After getting your EIN, things can happen. For example, you can forget or lose your EIN. If you are in this scenario, don’t fret, as you can look up the number. To help you out, here is look up my ein.
One way to do it is to check your old tax returns, and if you have been filing returns, you will find it there. If you haven’t been filing returns or you can’t trace them, visit the bank where you opened your account and see if they can give you the number. You also should pay a visit to your state agency where you got your license and ask them to help you with your EIN.
If none of the above options bears fruits, call the IRS Business & Specialty Tax Line. You can reach them on 800-829-4933, and you can reach them from Monday to Friday from 7 am to 7 pm. ET.
The assistant will ask for identifying information such as the name of your business, the owner's name, and they will give you your EIN on the phone.
Can you make changes to your EIN?
Yes, you can make changes to your EIN, but the changes that you make depend on the changes that you are making in your business. If making minor changes to your business, you can notify the IRS and continue using the same number, but if making major changes, you have to apply a new EIN.
Regardless of the nature of the changes you have made to your business, let the IRS know about them so your files can be updated.
Can you cancel your EIN?
Unfortunately, you can’t cancel your EIN. Once the number is assigned to your business, it belongs to your business forever, and it can’t be assigned to any other business.
One thing you can do, though, is to close the business account with the IRS. To do that, send a letter to the IRS including the complete legal name of the business, the EIN, your business address, and the reason you want to close your account. It’s also wise to include a copy of the EIN assignment notice that you were issued when you were assigned the EIN.
Once you have the documents, send them to: Internal Revenue Service Cincinnati, Ohio 45999.
You should note that the IRS won’t close your account if you have any unsettled business, such as needing to file a return or owing taxes. So before you request for the closure of your account, pay any pending taxes and settle any other business.