Taxes

Ask the Tax Expert: Do I Need an EIN?

Stephen Fishman
Tax expert and contributor MileIQ

EIN is short for employer identification number. It is a nine-digit number issued by the IRS and used to identify businesses and individuals for tax purposes. As a business owner, you'll need an EIN to open a business bank account, apply for business licenses and file your tax returns.    Here we discuss if you really need an EIN, the number of ways getting an EIN, and how to get a new EIN if the status of your business changes.  

Can you use an EIN instead of a social security number?

If you're an employee, you dont need an employer identification number (EIN). You'll use your Social Security number to identify yourself for IRS purposes. An EIN, also called a tax ID number, is required for most business entities such as multi-member limited liability company (LLC), corporation, or partnership. If your business is a sole proprietorship or single member LLC, the IRS does not require you to have an EIN. You can use your Social Security number unless:  

       
  • You hire employees
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  • Your LLC elects a corporate-style taxation structure
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  • You have a Keogh or solo 401(k) retirement plan
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  • An existing business is bought or inherited and you plant to operate it as a sole proprietorship, or
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  • You file for bankruptcy.
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What are the advantages of having an EIN?

Even if you are not required to use an EIN, you may want to get one anyway. One reason to do so is that using an EIN instead of your Social Security number will help you keep your personal Social Security number more private. Subsequently, the EIN can help prevent identity theft. If you already have an EIN, youll need to obtain a new one if the ownership or structure of your business change. For example, you take on partners, incorporate your business. You don need to obtain a new EIN if you change your business name or location.  

Can I get an EIN over the phone?

It's easy and free to obtain an EIN. Call the Business & Specialty Tax Line at (800) 829-4933. Someone will take your information over the phone and assign you an EIN at the end of the conversation. You can do it online at the IRS.gov website, or by completing and filing IRS Form SS-4. Use your EIN on all business tax returns, checks, and other documents you send to the IRS. Your state tax authority may also require your EIN on state tax forms.  

When do you need a new EIN?

       
  • Additionally, there are specific instances where you will need to get a new EIN:  
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  • Existing business transfers (either through a purchase or inheritance) to someone who plans to run it as a sole proprietorship
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  • Business changes from a sole proprietorship to a corporation or partnership
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  • Company changes from a partnership to a corporation or sole proprietorship
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  • Conversely, the business changes from a corporation to a partnership or sole proprietorship
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  • Individual owner dies, and business is taken over by the estate.

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