What is an EIN Tax ID?

An EIN tax ID is a federal employer identification number, used to track tax activity by the United States government. Institutions like banks require that businesses have an employer identification number before they are legally able to open an account. Businesses can apply for an EIN tax ID on the IRS website. A tax ID can be thought of as a social security number. Essentially, it acts as a SS# for your business, tracking tax records, just as our social security numbers do for us. When you apply for a federal tax id, it needs to be submitted for anyone wishing to run a legal business in the United States.

Your business probably needs an EIN tax ID if you plan on hiring employees. You will need to use this identification number when you apply for a checking account, when filing for taxes and filing state taxes and payroll. Sole proprietors can usually get away without filing for a Tax ID number, but most other businesses need one. Since a sole proprietor has no employees, they can use their own social security number as their tax ID. If you are selling liquor, cigarettes or firearms you will need your ID number to file tax returns. You can apply for an EIN tax ID either online, over the phone, through the mail or by using a fax machine.

Once assigned an EIN number, the government can track your businesses comings and goings. The EIN application process can take anywhere between 1 day to a few months to complete, depending on your method of choice. Online and over the phone are always preferred to sending a fax or a letter. Only complete your forms through the IRS, beware of scams that require you to submit a payment of any kind.

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