Getting your business registration is the first step to being acknowledged by your customers. Regardless of your great ideas and high hopes, if your company is not legally verified, you can never truly accomplish your goals. Registration protects your company’s name by inaugurating it as a separate legal entity. It also secures your personal assets and keeps them from getting caught up in liability if you are sued.
Even though the registration process can be tricky (it takes some time, a lot of sweat and effort, and a whole lot of patience,) it can be done by following a simple procedure. One of the foremost steps in getting your company registered in the United States is requesting an EIN. Now, you must be wondering how to do that. Luckily, we have the answer for you. But first, you need to understand what an EIN is how it works, and how long does it take to get an EIN.
What is an EIN?
An EIN (Employee Identification Number) or FEIN (Federal Tax Identification Number) is a nine-digit number assigned individually to a business or organization as an identifier. The Internet Revenue Service assigns the EIN to businesses that meet its criteria. This unique set of digits proves a company’s legal existence and makes it easier for the IRS to recognize U.S.-based businesses. In other words, an EIN is like a social security number for organizations and is just as essential as a name.
Why Do You Need an EIN?
An Employee Identification Number is mandatory for U.S.-based businesses to report for taxes. After your company has reached a certain standard, you cannot operate without first getting an EIN. Even though it is not mandatory for sole proprietors, companies must have an EIN to recruit employees, gain a business license, pay taxes, and receive payments. None of this can be done without an EIN.
You will also require an EIN if you want to retain taxes from income or file tax returns. It is also a compulsion for businesses affiliated with multiple organizations (exempting non-profits). These nine digits can separate your personal finances from your business and allow you to avoid identity theft.
It should be noted that if you maintain a partnership, you and all other partners need a separate EIN. This is necessary for taxes and filing bankruptcy. An EIN is mandatory even if a partner does not hire employees.
IRS offers a free service to apply for an EIN. If you are new to this, watch out for spam websites charging money for the application. To avoid wasting time, ensure you have the necessary documents on your person. You will be asked to disclose the following information:
- Business type, name, and address
- Detailed information about the company’s owner and their finances
- Partnership agreements
- Documents to prove the legal structure of the entity
- The potential number of employees you will hire within the next year
- Purpose of applying for the EIN
- The type of employees hired
- Whether there is a chance of paying over $1000 in payroll tax in the coming year
You will also be asked to give an account of your company’s principal industry.
How Can I Apply for an EIN?
There are multiple ways to apply for an EIN, and it all comes down to your preferences. Depending on what works best for you, you can apply online, by fax, or by mail. International applicants can also apply by telephone. Remember that unless you represent a government organization, the IRS requires the responsible business party to be an individual rather than an entity. Despite the application method, applying for an EIN is free of cost.
Online application is the most preferred and convenient method to obtain an EIN. It allows users to complete the whole process from the comfort of their home. Once you have gathered all the required documents, you can get the application form from the official IRS website. After the form is filled, an online session will be held to verify your information. After that, you will immediately receive your EIN. It should be noted that the online applications are restricted to businesses located in the U.S.
Applying by Fax
The official IRS website displays an application form that can be downloaded in PDF format. You can fax the form after filling in the required information. After ensuring the entity type and its eligibility for EIN, you will receive the assigned EIN on your fax number (that you provided) within four working days.
Applying by Mail
Although it is not a highly preferred method, you can still apply for an EIN by email. You can get the guidelines on how and where to mail your application form from the website. Attach the documentation along with the required information. Once the procedure is complete, the IRS will send an EIN to you via mail, depending on the entity type.
Apply by Telephone
There is an international number available from 6 a.m. to 11 p.m. (Monday to Friday) that you can call to request an EIN. This number is specifically for international applicants. It should be noted that the caller must be eligible to receive the nine-digit number, and they will have to answer some questions. There is a third-party designee section that you can fill in to nominate another person to receive the EIN and answer the questions.
Once the completion of this process, the designee will receive the EIN, and the nominee will be eliminated. You will also provide your signature for the authorization.
How Long Does It Take to Get an EIN?
The duration to obtain an EIN depends on the direction you take to apply and a few other factors. You can speed up the process by thinking it through and deciding on the method that suits your convenience. We will discuss the processing time for each factor step by step to help you make the right decision.
Processing Time for Online EIN Application
If you are looking for the fastest way to complete the EIN application process and help you obtain the number, apply online. The online session is highly convenient for people who want to save time and prefer to expedite the process. After the approval, you will receive your digital EIN in your inbox shortly after you apply.
Duration for Applying Through Mail
As we have established earlier, the IRS offers a backup for applicants who cannot access the online application form. However, applying through the mail is the most time-consuming approach and should not be considered unless you cannot use any other method. After submitting the form, you must wait at least four weeks after the approval. This is quite tardy.
Processing Time via Fax
Although fax is an old-fashioned approach, it is swifter than the mail. Instead of waiting four weeks, you can receive the EIN within four days. Even though it is not as fast as the online process that offers immediate results, applying through fax is still preferred by many.
Processing Time for International Applicants
If you are running a business outside the U.S. territory, the processing time will differ based on the accuracy of your information. Even though the process, in general, is quick, it can be delayed due to minor mistakes. The IRS representative can even reject the application if they detect any negligence.
Factors Affecting the EIN Processing Duration
Besides the estimated time frame of each method, EIN issuance can be affected by a few other factors. Even after you have received the EIN, it will take a minimum of 30 days for the official documents to arrive. Moreover, you can start applying for licenses right after receiving the EIN. But, at least two weeks will be needed for the EIN to be declared permanent. You can make electronic payments to the IRS afterward.
National holidays and weekends can also delay the process. Here are some critical points to contemplate;
- Providing incorrect information, even mistakenly, can cause unnecessary delays in the application process. It is wise to thoroughly recheck all the information before you fill out the form.
- Do not apply for an EIN if you are a sole proprietor with zero employees. Applying unnecessarily for an EIN causes unjustified confusion. On the other hand, you can apply for an EIN even if you have one employee.
- An oft-cited mistake is applying for multiple EINs for the same business entity. Never make that mistake. Your business only needs one EIN.
- There are multiple application forms on the IRS website. Each form is reserved for a different business entity. For instance, foreign applicants will fill out a form unlike the one reserved for most business entities. Avoid unnecessary delays by filling out the correct form.
- Lastly, understand the concept of EIN before jumping right into it. You can request assistance from an IRS representative to avoid confusion. Reading the instructions carefully and following them to the letter can also help you avoid mistakes.
Limitations of Employee Identification Number
The IRS restricts the EIN issuance to one responsible party per day. Regardless of the application method, you will only receive a single EIN for one entity. For instance, if you need more than one EIN for different entities, you can apply for each on a separate day. This is important if you are running multiple business entities.
Reasons for Rejection
Occasionally, the IRS can reject an application straightaway and notify the applicant to re-apply. Although it is unlikely, your application can get rejected or returned with an error 101 if:
- An existing EIN is showing in the record for your business entity
- Your application form is incomplete or contains incorrect information
- The entity you are requesting an EIN for has duplicate records, or an existing EIN has the particular entity mentioned as the responsible party
- Submitting multiple applications for the same purpose
- Conflict in the name
In case of a rejection, you can send an amended application. There is a chance that the original rejection will be revoked. However, amended applications can only be sent via mail.
Some Important Points
An EIN includes information regarding the location where the business entity is registered. The application process is generally hassle-free if there are zero mistakes. All the instructions are available on the website. However, there are some additional points that you should remember if you are planning on applying for an EIN.
Validity of an EIN
Once a business EIN is assigned to you, it will never expire. That nine-digit number will be a permanent taxpayer identity for your business even if you don’t use it. Even when your business is dissolved, its EIN will not be reassigned to anyone else.
Requirements for a New EIN
As noted above, an EIN never expires. Even the IRS can never dissolve it completely. In case of any changes made in the business name, structure, or address, you are expected to contact the IRS and apply for a new EIN. You can also inquire about the validity of your EIN to ensure you don’t need a new one. For example, a home-care service applicant with an existing EIN as a sole proprietor does not require a new EIN.
Recovering a Lost EIN
In case of a lost EIN, the previous tax return files and IRS communications will enable you to find the EIN. It is advised to contact the respective authorities if the misplaced EIN has been used to receive a license or open a bank account. If everything else fails, the last option is to get in touch with the IRS. A customer representative will verify your information and assign the number instantly.
Closing an EIN
An applicant might realize they do not need an EIN after receiving it. For instance, a startup business that is never launched. In such cases, you must mail a physical letter with the necessary information with the entity name, address, and EIN. The reason for closing the account should also be included in the letter. Even though the IRS cannot technically terminate the EIN, the associated account will be closed.
If you are confused or don’t understand the EIN application process, it is best to authorize a third party to carry out the application process on your behalf. Once you have received the EIN, their involvement will end right away. The designee should be able to find the last section on the form reserved for the nominee and fax or mail the complete application form to the service center.
Identifying the correct number of individuals considered as responsible parties for an EIN is crucial to avoid possible errors. The IRS has made some changes to the EIN process. Head to the ‘Responsible parties and nominees’ section to know these changes before applying.
Final Words on How Long Does It Take to Get an EIN
The duration for EIN issuance highly depends on how you choose to apply. The fastest way to complete the process is via an online application. It ensures same-day allotment of your EIN. International applicants are better off with telephone applications. The IRS agent is expected to identify the entity for an EIN on the same day.
Fax is the second-best option as its processing time is generally four business days. To streamline the process, include a fax return number with your application. Mailing your EIN application is by far the least recommended and the most time-consuming method. The minimal waiting time is four weeks, which can be extended to unexpected turnaround time due to certain conditions (that we discussed earlier.)
Considering the process, it can be a little tedious for the applicant. Even though a PDF form can be filled out online, it is rarely the choice. Generally, an applicant has to print out the form and fill it by hand. The next step would be to find an envelope and stamp the mail. Going to the post office adds to the inconvenience. There is a potential risk of losing your personal information in an unattended mailbox.
It should be noted that the option to apply via telephone is only available for international entities. Moreover, depending on your location, some options may not be accessible. To sum it up, all these factors can dramatically affect the total duration for you to receive the EIN. There is no fixed estimate. However, you can eliminate additional delays by being vigilant and avoiding mistakes.
A tip to streamline the application process is to be prepared with the necessary information before filling out the form. You can also approach a tax ID service. They will read your form and point out your mistakes. Their tips and instructions will improve your chances of approval.
Lastly, understand the purpose and process of EIN entirely to determine what works best for you. Don’t jumpstart the application process without ensuring that you need an EIN. Knowing what form to fill out for your specific entity is another significant step to ensure a foolproof application process and unnecessary delays.