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Payroll & Taxes

What is a Federal EIN Number?

Nearly all businesses use an EIN number to file tax returns. Here’s how to qualify and apply for one.

Blog Author - Justworks
Justworks
Sep 28, 20162 minutes
Blog Author - Justworks
Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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If you’re running your own business, you’ve likely heard talk of a federal EIN number. Having an EIN number is vital when it comes to taxes.

For example, if you’re a contractor with a Limited Liability Company (LLC), you can be paid through your EIN in order to avoid double taxation on your income.

Read on to learn exactly what an EIN number is, who qualifies for it, and how you can apply.

We've built a handy reference sheet so you can tell the difference between an ITIN, SSN, or EIN. You can download it for free here.

What is an EIN Number?

An EIN number, or Employer Identification Number, is used by businesses to file federal tax returns. It’s also the way the IRS identifies companies in general, too.

It’s nine digits long and formatted like so: XX-XXXXXXX

The EIN number goes by many different names, such as:

  • Federal EIN number

  • Federal identification employer number

  • Federal tax ID number

Don’t let all the pseudonyms confuse you. These are all just name variations on the same thing — Employer Identification Number.

Who Uses an EIN?

Generally, people who own or operate businesses need an EIN for business tax returns. EINs are used by:

  • Employers

  • Sole proprietors

  • Corporations

  • Partnerships

  • Non-profit associations

  • Trusts

  • Estates of decedents

  • Government agencies

  • Certain individuals

  • Other business entities

Not sure which kind of entity your business is? We have a quiz you can take here.

According to the IRS, you need an EIN if you:

  • Have employees

  • Operate your business as a partnership or corporation

  • File tax returns on employment

  • Withhold taxes on income, other than wages, to a non-resident alien

  • Have a Keogh plan

  • Are involved in any organizations like trusts, estates, or non-profit organizations

You only need to fall under one of these categories in order to need an EIN. You can read more about the details and exemptions here.

You’ll also need a “responsible party” to file for the EIN, which we’ll explain below.

What is a Responsible Party?

A responsible party is a person who is responsible for tax payments through their EIN number. According to the IRS, a responsible party may be:

A person who is a responsible party also requires a valid tax ID, such as an SSN or ITIN.

Payroll & Taxes

What's In A Number? The Differences Between ITIN, SSN, & EIN Explained

Use this ebook to better understand the various numbers that are issued by the Social Security Administration and the Internal Revenue Service.

Learn More

Which Businesses Qualify for an EIN?

Businesses will qualify for an EIN number if they meet the requirements detailed above and have a principal business located either in the U.S. or U.S. Territories, such as Puerto Rico, the Virgin Islands, and Guam.

How Do I Apply For an EIN?

You can apply for an EIN online, by fax, email, or phone. As of 2012, the IRS only allows the application of an EIN number once a day by a responsible party.

If you apply online, you will get your EIN immediately.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Justworks
Sep 28, 20162 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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