Your tax identifier is the key that identifies your overall tax burden. But it is also used to apply for loans and bank accounts, as well as many other essential elements required for running a business. If you do not have a tax identifier you cannot pay taxes – and you are not legally allowed to run your business until you have one. You will also be prevented from basic business operations without a legitimate tax number.
With this in mind, you obviously need to know what it is. Remember that your business tax ID is different from your personal tax ID. Understand the difference between the two – in many instances, you might want to shift some tax liability from personal to business. To do so, you need to know both tax numbers and understand the tax obligations under each.
What is a Tax Number Anyway?
A tax number is a unique identifier denoting a specific business entity for the purposes of taxation. A tax identification number (‘TIN’ or ‘ITIN’) is different from a social security number (‘SSN’). A TIN always starts with the number ‘9’ and is issued to certain nonresident and resident aliens living in the USA. In short, people living in the USA who cannot get an SSN are assigned a TIN. SSNs do not begin with the number 9.
The 3 major credit agencies (Experian, TransUnion, Equifax) use the SSN number for credit assessments. They do not accept TIN numbers. For more information about these credit rating agencies and how to raise your credit score, take a look at our article – What is a good credit score?.
The Employer Identification Number (‘EIN’) is required for any business that has employees. This is pretty much every business except single person sole proprietorships. Businesses taxed as corporations or partnerships are also required to have an EIN. Remember, you have two tax obligations. Your business will need to be taxed, and so will your personal tax. However, this may depend on your specific legal entity structure. Pass-through entities such as LLCs are not subject to double taxation.
The Internal Revenue Service (‘IRS’) is responsible for the issuance and governance of tax numbers. Like the SSN and TIN, the EIN is a 9-digit number. The first 2 digits are separated from the remaining 7, like this: XX-XXXXXXX.
What is The EIN Used For?
The EIN is used for many things. These include:
- When filing tax returns (primary reason).
- When checking a credit score.
- When applying for a business loan.
- When opening a business bank account.
- When applying for a business credit card.
- When issuing an IRS Form-1099 to an independent contractor.
How to Apply for an EIN
As you can gather from the above, you need to have an EIN number for the running of your business. Thankfully, generating an EIN is easy. Bear in mind, you need to be located in the USA and you need to have an existing EIN, TIN, or SSN to apply. Once these criteria are satisfied, you simply go to the IRS site and fill out the online application. The only form you need is known as the IRS Form SS4. The EIN is automatically generated upon completion. It should take less than 10 minutes to fill out the form. Filling out the form is relatively straightforward. It only becomes tricky if you are filing as an LLC. Technically, the IRS does not recognize the LLC as a tax filing entity:
- If you are a single-member Limited Liability Company, go to box “Other” and insert “disregarded entity-sole proprietorship”
- If your Limited Liability Company is multi-member (two or more), check the box for “partnership”
- If your Limited Liability Company has elected to be taxed as a C Corp/S corporation, or Professional Services Corp, check the appropriate box.
When filing an IRS Form SS4, you will need the following information:
- Entity type (corporation, sole proprietorship, LLC, etc).
- Legal and trade name of business (if applicable).
- Business address
- Purpose of application
- SSN, TIN, or EIN
- Start date of business
- Primary business activity
Other Ways to Apply For an EIN
There are other ways you can apply for an EIN number. International applicants must call (267) 941-1099. You can also fax a completed Form SS4 to the service center in your state, and they will respond within 7 working days. The Form SS4 can also be sent by mail, but this could take up to 6 weeks in total for the return confirmation.
Beware of fake EIN sites. These sites charge you money but do not give you a valid EIN number. Make sure you are visiting the IRS.gov site with the HTTP security certificate. Some of these fake sites charge up to $129 to send the form to the IRS, though there is zero charges to get an EIN number with the IRS in practice.
How to Find Your EIN
There are many ways you can check your EIN, provided you already have one. The first, and most obvious, is to check the initial confirmation that you got from the IRS. This will be in the form of a letter, email, online document or fax, depending on your chosen method of application. Once you receive this copy, whatever its format, it is best to store it away safely. But if you cannot find this initial document, there are many other options. Practically all correspondence you have with the tax authorities will have your EIN on it. Such documents include:
- IRS letters
- Business licenses and permits
- Loan applications
- Bank accounts
- Credit reports
- 1099 forms and other payroll reports
- Federal tax returns
In short, your EIN number is stored on many documents, and you should easily be able to find it if you simply look. It will be clearly labelled as an EIN and it has 9 digits. It won’t be hard to miss. If you have misplaced your EIN confirmation letter and your business is just getting started, then you will need to contact the IRS by phone on 800-829-4933. This is the Business and Specialty Tax Line, open Monday to Friday from 7 a.m. to 7 p.m. This should be your last resort option because the call wait times can sometimes be very long.
However, it’s not the end of the world – you can also contact the IRS for an amendment. Do not apply for a new EIN if you make a mistake on the first one. You have to send a letter to amend. We’ll take a look at how to do this below.
Changing or Cancelling the EIN
An EIN is for life, and it will stay with your business unless you cancel it or change it for specific reasons. However, there are many instances where you might need to change your EIN number. You might purchase another business or your business might become a subsidiary of another, both of which require a new EIN. You may also need to change your EIN if there are changes to the ownership structure or if you are a sole proprietorship subject to bankruptcy proceedings.If you change your location or business name, remember that you don’t need to get a new EIN. But you will still have to report these changes to the IRS. You can report a change of business address with an IRS Form 8822B. If you are changing your business structure, you can file an IRS Form 8832.
A new EIN will automatically replace your old EIN, so you don’t have to cancel/deactivate it. Technically, you don’t really cancel an EIN. What happens is that you close your account with the IRS. You might do this if you closed your business or you never got started. But you can ‘reopen’ this account with its EIN. The same EIN number is never given to another business entity – they are all unique. If you open a separate business enterprise, then you will need a unique EIN unless they are merged together into one distinct legal entity.
To close your account, you send a letter to the IRS, indicating the name of your business and why you wish to close your account. Remember, you must pay off all taxes before you close your account, including income, payroll, and employment taxes.
Looking up the EIN Number for a Different Business
Finding the EIN number of a different legal entity is also quite straightforward, though obviously not as straightforward as finding your own. You can simply:
- Reach out to the company and ask them.
- Search the SEC database to find their information, if they are a publicly listed company registered with the SEC.
- Look up the company’s credit report (this may incur a charge).
- Use a commercial EIN database to find the number (will also incur a charge).
If you wish to find the EIN of a different company, then you will have to pay for it. Alternatively, you need to ask them if it is not publicly listed on the SEC Edgar site. This is to prevent scammers from committing one of many kinds of fraud.
Protect Your Tax Information
In terms of your own EIN number, don’t give it out to everybody and anybody who asks. Social engineering is on the rise and there are always new ways to infiltrate companies. For example, the Federal Trade Commission reported a surge in social security scams in 2018 where people were called and asked to confirm their number. They were told that a scam had taken place and that they needed to confirm their number to make sure they were safe. Ironically, the scam really took place when they willingly gave the scammers their numbers. Many of these scams can take place, and in some instances, the customers are told that they qualify for extra benefits once they confirm their social security numbers. Other scams include stealing mail from mailboxes – if you have any checks, invoices, or tax statements, the scammer has all of your info.
If your credit card number is breached, then it is easy to close an account and start a new one. You will also be refunded charges by your bank. But when a social security number is compromised, these numbers cannot be changed or edited. With information such as EIN, legal entity name, address, and other basic invoice information, a hacker can commit invoice fraud. They can also proceed to apply for loans and other applications using your company credentials.
While EINs can be found and queried, the less information that is available to the public, the better. More than 3,800 EIN-related breaches occurred in the first six months of 2019, according to a report by Risk Based Security. This is a 54% increase over the same time period in 2018. The majority of breaches resulted from outside attacks.
How to Check if Your Tax Information Has Been Hacked
Security is more important than ever before, and criminals are getting more inventive. With this in mind, it might be a good idea to have a system of checks and balances in place. Some methods to figure out if your business has been compromised include:
- When you get tax notifications about employees that do not work for you.
- When your tax return is accepted as amended, though you have not yet filed it
- When you receive bills for a line of credit/loan that you never took out.
Remember, you have a responsibility to let customers and certain third-parties know if your business has been compromised. It is important to keep up to date and take all reasonable precautions. Moreover, each US state has specific data breach laws to comply with. You may have additional requirements depending on the industry type and regulatory authority governing that industry.
If you think your business may have been a victim of fraud, download a credit report immediately and report it to the authorities. You may need to dispute a credit report so that the errors are fixed. This is quite straightforward to do, and you will have to notify one of the 3 credit reporting agencies. They are legally obliged to respond within an appropriate time frame.
When you download your credit report, you might find information to be out of date or inaccurate. This happens more frequently than you might think. It is always a good idea to download and check your report periodically, at least once every 12 months. The longer the scam goes on, the more money you could lose and the worse your credit score might be affected.
At the very minimum, you need to look at your credit report once a year – it is 100% free to download a report from each of the 3 credit agencies once every 12 months. To access this report, visit annualcreditreport.com.
There really is not all that much to find your EIN number. It’s free to file and you get a confirmation when you do, by letter, email, or fax, depending on your preference. It will also be on all of your tax documents and many other significant papers.
Protecting your EIN number is a different matter entirely. Make sure to keep it safe, along with all of your other confidential information. Download your credit report frequently and never give out sensitive information to any party by email or phone.