The Employer Identification Number, commonly called the FIDER, is an individual nine-digit number assigned to business organizations running in the United States for the purpose of identification. Businesses can use this number to file tax returns and pay taxes, as well as to make sure that employees are working for and under the payroll of an employer. The numbers come from ERIC, which stands for Employee Repayment Information database. These records can be searched using a license number that matches an Employment Identification Number (EIN) or with a Social Security number.
Who Needs an EIN?
The ein is issued to both small businesses and large corporations, but they have slightly different formats. Most small businesses start out with only one EIN and may continue to submit paper tax returns for a short time. This is because many states require the filing of paper tax returns for federal tax purposes. When a business gets an additional EIN, it generally becomes self-employed or transfers some or all of its tax responsibilities to another business entity. However, businesses need to know the correct format for their state’s filing requirements if they want to apply for an EIN.
If a corporation has been in operation for at least two years, there is an easier way to apply for an ein. If a corporation has not filed an income tax return, it does not have to file an application with the IRS to look for an ein; the corporation is considered a non-filer for federal tax purposes. But if a corporation is planning to file an income tax return, it can still apply for an ein and follow the other procedures that must be followed.
Corporations generally receive an ein for most types of transactions, including income tax returns, purchases made within the course of business, donations of property, supplies, and fees paid to or on behalf of the corporation. There are situations where the proceeds of a transaction might need to be exempt, though. If a charity receives payments or grants from a non-profit organization, the charity might need to report those payments or grants as income to the IRS. So, any money received from non-profit organizations might need to be reported on an EIN.
A qualified corporation might receive an ein when it forms a new ein. To qualify for a new ein, a corporation has to file a Form EIN with the IRS. A qualified corporation cannot be a C corporation, partnership, or unincorporated organization. Also, the new ein has to be registered with the IRS as a qualified business entity.
How to Qualify
Business owners who do not meet the requirements for a qualified corporation or a non-incorporated business may still qualify for an ein. An individual can obtain an ein number by filing an application with the IRS. There are also ein lottery applications available. When a person wins a lottery, he is issued a ein number. The ein number needs to be reported on the winner’s tax return.
The EIN allows an individual to file his taxes more quickly and easily. However, there are some situations in which an ein may not be appropriate. An ein can be filed only if the individual owns and controls a corporation, partnership, or unincorporated business. There are also special situations in which an individual may need to obtain an ein, but he does not own a company.
In some situations, a person does not qualify for an ein, but he does qualify for a social security number. Some social security numbers are hard to obtain, and there are cases when people get two EINs because their first one was canceled. When applying for an ein, the applicant needs to provide a valid social security card or birth certificate. However, an ein is not always required. An ein number can be requested for free from the IRS. Some small business owners also go to great lengths to obtain their ein, paying a fee to request it.