The Employer Identification Number, also known as the Federal Employer Identification Number or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service 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, and when used for the purposes of reporting employment taxes, it is usually referred to as an EIN. These numbers are used for tax administration and must be not used for any other purpose. For example, the EIN should not be used in tax lien auction or sales, lotteries, etc.
Similar in purpose to the Social Security number 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 Social Security number 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 SSNs and EINs. SSNs 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 7306, 39 Fed. Reg. 9946. The authority for EIN's is derived from 26 USC 6011, 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. 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 businesses that do not are considered proprietorships and the Owner / Operator SSN is used on any tax documents. Also, 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. Before 2001, the first two digits of an EIN indicated the business was located in a particular geographic area. In 2001, EIN assignment was centralized at three of the IRS campuses, although all 10 campuses can assign an EIN, if necessary.
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. Before applying for an EIN, it is always preferred to check whether the affected organization has been formed legally or not. Almost all organizations that apply for EINs can have their tax-exempt status automatically revoked if they have failed to file a necessary return or notice for a period of three years consecutively. Such three-year period begins when the organization is legally formed; it is best to form the organization legally before applying for an EIN.
EIN expiration
EINs do not expire. Once an EIN has been issued to an entity, it will not be reissued.
