In the United States, an EIN, or an Employer Identification Number, is more commonly known as a company’s social security number. It is also referred to as a Federal Employer Identification Number (FEIN) and a TIN when it is being used for identification. It is issued to anyone who will be responsible for paying employees withholding taxes.
What Is An Employer Identification Number?
This nine-digit number is issued by the IRS (Internal Revenue Service), and it can be used by different types of corporations such as:
The IRS uses this number to record taxpayers who will need to file different tax returns for their companies. Individuals who are business owners or employers can use an EIN or their social security number to report the taxes withheld for employees. Contrary to belief, credit bureaus are able to tell the difference between an EIN number and a social security number.
The Creation Of The EIN
The IRS created the EIN system in 1974 in order to require identification for taxpayers for the sole purpose of paying employment taxes. This relevant provision was adopted the first time as part of the Tax Code Revision in the mid-1950s, and it was then expanded in 1961.
During this time, it was agreed that the EIN would be using the form of 00-0000000, and the social security number would take the form of 000-00-0000. This makes it easier to tell the difference between the two.
Who Is Responsible For The Number?
When you apply for an Employer Identification Number, the Internal Revenue Service requires that you provide them with the name and tax payer identification of the person who is responsible for the company. This means that the owner, trustor, grantor, or principal officer will need to provide their information before being issued an EIN.
Can An EIN Be Canceled?
Once you are issued an EIN, it cannot be canceled. It is assigned to the registered business, and it will never be assigned to another tax payer even if you never open the doors to your business.
The number will never be canceled either. However, you can request that the IRS close the account. If you ever decide to reopen the account, you can simply send the agency a written request.
Business owners must have an EIN on file, whom are still thinking how to find a business name for staring their own business. So they can pay employees and file tax returns for the business. A business that does not have an EIN will be considered a sole proprietorship, and the business owner’s social security number must be used on tax documents.