What is an EIN and why does a business need one? What is it used for? How does one apply for it?

An EIN is an Employer Identification Number that identifies any business entity that has employees.  It is a nine-digit number assigned by the Internal Revenue Service (“IRS”) and is formatted in the following way: XX-XXXXXXX. EINs are used to report information about your company’s employees to various federal and state agencies, including the IRS and the Texas Workforce Commission, as well as various private entities, such as plan administrators for employee retirement benefit plans and employee health insurance providers. EINs are issued to any group that has employees, including a wide variety of business entities, non-profit organizations, government agencies and certain individuals that are required to file business tax returns. For example, your EIN is required when completing a “New Hire Report” for purposes of determining an employee’s immigration status.

Companies can apply for an EIN from the IRS online, over the phone, by fax or by mail; this process should be completed before your company hires its very first employee. The online method is usually preferred because the applicant’s EIN is issued immediately after completing the online application. To file an online application, the applicant must have its principle office located in the United States and the principal officer, general partner, owner or other qualified individual completing the application form must have a valid Taxpayer Identification Number, Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number. [Information and links to the online application are available at http://www.irs.gov/businesses/small/article/0,,id=98350,00.html.] Applicants can also obtain an EIN immediately by calling the Business and Specialty Tax Line at 1-800-829-4933 between 7:00 a.m. and 7:00 p.m. Monday through Friday. An EIN is assigned after the necessary information has been taken and is provided to an authorized individual. Finally, you may apply for an EIN by mail or fax using the SS-4 form. It usually takes about four days to receive an EIN when using the fax method and four weeks when by mail.

Prepared by Eric Rupe.  Reviewed by Cynthia Veidt, Attorney.