An employer identification number, written EIN, is the nine-digit taxpayer identifying number the IRS assigns to a person other than an individual so that its filings can be matched to it. The name is misleading and the regulation says so on its face: the holder does not have to be an employer.
What the Regulation Actually Says
The definition is one sentence and it is worth reading with its scope words attached. For purposes of this chapter, the term employer identification number means the taxpayer identifying number of an individual or other person, whether or not an employer, which is assigned pursuant to section 6011(b) or corresponding provisions of prior law, or pursuant to section 6109, and in which nine digits are separated by a hyphen, as follows: 00-0000000 (26 CFR 301.7701-12).
Three things fall out of that. The parenthetical, whether or not an employer, is the whole answer to the most common question about the term. The format is fixed at two digits, a hyphen and seven more, which is what separates it visually from a social security number written 000-00-0000 (26 CFR 301.6109-1(a)(1)(i)). And the same regulation records that the terms employer identification number and identification number refer to the same number (26 CFR 301.7701-12).
Who Must Use One
The identifying number rules sort filers into four cases, and one exception opens the whole list, for what applicable regulations under the chapter, or a return, statement or other document and its related instructions, otherwise provide (26 CFR 301.6109-1(a)(1)(ii)). Except as otherwise provided in the regulation, an individual required to furnish a taxpayer identifying number must use a social security number, and an individual required to furnish one but who is not eligible to obtain a social security number must use an IRS individual taxpayer identification number (26 CFR 301.6109-1(a)(1)(ii)(A) and (B)).
The third case is the one that matters here. Any person other than an individual, such as corporations, partnerships, nonprofit associations, trusts, estates, and similar nonindividual persons, that is required to furnish a taxpayer identifying number must use an employer identification number (26 CFR 301.6109-1(a)(1)(ii)(C)).
The fourth case reaches back to individuals and is worded softly. An individual, whether US or foreign, who is an employer or who is engaged in a trade or business as a sole proprietor should use an employer identification number as required by returns, statements, or other documents and their related instructions (26 CFR 301.6109-1(a)(1)(ii)(D)). Should, not must, and the requirement is pushed out to whatever the form itself demands. That is why a sole proprietor with no employees can often file on a social security number and still want an EIN for other reasons.
The IRS states the practical trigger list the same way. Generally, an EIN is needed to hire employees, operate a partnership or corporation, pay sales and excise taxes, change business structures or ownership, and administer certain trusts, retirement plans and estates (IRS, Get an employer identification number).
How One Is Obtained
The application route is fixed by regulation. Any person required to furnish an employer identification number must apply for one, if not done so previously, on Form SS-4, and must make the application far enough in advance of the first required use of the number to permit issuance in time for compliance (26 CFR 301.6109-1(d)(2)(i)). The same paragraph puts a continuing duty on the holder, to provide the IRS any updated application information in the manner and frequency required by forms, instructions, or other appropriate guidance (26 CFR 301.6109-1(d)(2)(ii)(A)).
Two facts about the IRS’s own online tool are worth knowing before anyone pays for the number. It is free, and the agency says plainly that you never have to pay a fee for an EIN (IRS, Get an employer identification number). And the throughput is capped, at only 1 EIN per responsible party per day (IRS, Get an employer identification number), so entities that share a responsible party queue behind one another, which how to file a business tax return works through at intake.
The tool also has conditions. It is for a domestic organization formed or created in the United States or US territories, with its principal place of business in the US or US territories, applied for by the responsible party in control of the entity or that party’s authorized representative, who must hold the responsible party’s social security number or individual taxpayer identification number, and an applicant whose principal place of business is outside the US applies by phone, fax or mail instead (IRS, Get an employer identification number).
Where It Turns Up in a Firm’s Work
The number is the join between an entity and everything filed about it, so a wrong one is a matching failure rather than a math error. It heads the entity return, it appears on every information return issued in the entity’s name, and it is what a payee certifies on a request for a taxpayer identification number. A corporation is a person other than an individual, so it furnishes an EIN rather than any individual’s number, and a corporation that chooses to be taxed as an S corporation does not need a new EIN (IRS, Do you need a new EIN?).
A firm that wants entity records and information returns reconciled against the numbers on file can hand Accountably a block of its own work through a trial task and grade it before anything live depends on it.
