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Employer Identification Number (EIN)


  • Also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number, the EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification.
  • When the number is used for identification rather than employment tax reporting, it is usually referred to as a Taxpayer Identification Number (TIN), and when used for the purposes of reporting employment taxes, it is usually referred to as an EIN.

How different is an EIN from a SSN?

  • Similar in purpose to the Social Security Number (“SSN”) assigned to individuals, EINs are used by employers, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain individuals and other business entities.
  • The IRS uses this number to identify taxpayers that are required to file various business tax returns. Individuals who are employers may choose to either obtain an EIN or use their SSN for the purpose of reporting taxes withheld on behalf of their employees.
  • Contrary to some misconceptions, credit bureaus and credit issuers can tell the difference between SSN and EIN Numbers. SSN Numbers can be validated as to origin and state / year of issuance. The credit bureaus and issuers are highly trained in fraud detection, and increasingly sophisticated algorithms and protections are used. This is why the EIN is not considered sensitive information, and is freely distributed by many businesses by way of publications and the internet.

EIN Format

  • The EIN system was created by the IRS in 1974 by Treasury Decision(TD) 7306, 39 Fed. Reg. 9946. The authority for EIN’s is derived from 26 USC 6011(b), requiring taxpayer identification for the purpose of payment of employment taxes. The provision was first enacted as part of the revision of the Tax Code in 1954. This authority was broadened in 1961 by 26 USC 6109.
  • An EIN is usually written in the form 00-0000000 whereas a Social Security Number is usually written in the form 000-00-0000 in order to differentiate between the two. There are EIN Decoders on the web that can identify in what state the company registered the EIN.

Who needs an EIN?

  • A business needs an EIN in order to pay employees and to file business tax returns.
  • To be considered a Partnership, LLC, Corporation, S Corporation, Non-profit, etc. a business must obtain an EIN.
  • Those business that do not are considered proprietorships and the Owner / Operator SSN is used on any tax documents.
  • Financial institutions such as banks, credit unions, and brokerage houses will not open an account for a corporation without an EIN.
  • Since all corporations – including ones with no income – must file at least a federal income tax return, a corporation operating or incorporated in the United States generally must obtain an EIN anyway either before or after being issued its charter.

Tax-exempt, charitable, non-profit organizations, and EINs

  • The issuance of an EIN to a non-profit organization is separate and distinct from the organization’s actually obtaining tax-exempt status from the IRS. Each chapter of a national non-profit organization must have its own EIN, but the central organization may file for a group tax exemption.
  • Before donating monies to a charity, it is advisable to verify its proper registration and IRS Form 990 tax-exempt status. The entire database is searchable, and one can verify an entity’s registration, status, and assets and liabilities registered in private databases.
  • All IRS Form 990-registered charities must obtain proper registration via the Internal Revenue Service. Another source for verifying an entity’s tax-exempt status is the IRS, itself.

EINs do not expire. Once an EIN has been issued to an entity, it will not be reissued.


Forms

990 – Tax Return for Exempt Organizations

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