IRS Releases Publication 1635 (2/2014), Understanding Your EIN, Employer Identification Number

What is an EIN?

An Employer Identification Number (EIN) is a nine-digit number that IRS assigns in the following format: XX-XXXXXXX. It is used to identify the tax accounts of employers and certain others who have no employees. However, for employee plans, an alpha (for example, P) or the plan number (e.g., 003) may follow the EIN. The IRS uses the number to identify taxpayers that are required to file various business tax returns. EINs are used by employers, sole proprietors, corporations, partnerships, non-profit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities. Use your EIN on all of the items that you send to the IRS and the Social Security Administration (SSA).

Caution: An EIN is for use in connection with your business activities only. Do not use your EIN in place of your social security number (SSN).

Effective May 21, 2012, to ensure fair and equitable treatment for all taxpayers, the Internal Revenue Service will limit Employer Identification Number (EIN) issuance to one per responsible party per day. This limitation is applicable to all requests for EINs whether online or by fax or mail. We apologize for any inconvenience this may cause.

You should have only one EIN for the same business entity. If you have more than one EIN and are not sure which one to use, call the Business and Specialty Tax Line at 1-800-829-4933 (TTY/TDD users can call 1-800-829-4059). Provide the numbers that you have, the name and address to which each was assigned, and the address of your main place of business. The IRS will tell you which number to use.

If you do not have your EIN by the time your return is due, write "Applied For" and the date that you applied for it in the space shown for the number.

Special Rules Regarding Entity Classification Elections

There are special rules and procedures for classification elections made on Form 8832, Entity Classification Election. Those rules and procedures are not reflected in this publication. The results explained in this publication may be different when an entity classification election is involved. See the instructions for Form 8832 for further information regarding entity classification elections.

Information by Type of Business Entity

This section contains the following information:

Definition

A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities and you undertake the risks of the business for all assets owned, whether or not used in the business. Include the income and expenses of the business on your own tax return. For more information on sole proprietorships, see Publication 225, Farmer's Tax Guide.

Form(s):

Business profits or losses of a sole proprietorship are reported on Schedule C, Schedule F of Form 1040, U.S. Individual Income Tax Return. A sole proprietor may also be required to file other returns (such as employment or excise tax returns).

You will need a new EIN if any of the following are true:

Corporation

Definition:

A corporation is defined as a legal entity or structure created under the authority of the laws of a state consisting of a person, or group of persons, who become shareholders. The entity's existence is considered separate and distinct from that of its members. Since a corporation is an entity in its own right, it is liable for its own debts and obligations. In forming a corporation, prospective shareholders transfer money, property, or both, for the corporation's capital stock.

The following businesses formed after 1996 are taxed as corporations:

Corporations usually file a Form 1120 series return, plus other returns that apply (such as employment or excise tax returns).

The Form 1120 series returns are as follows:

Definition:

A partnership is the relationship existing between two or more persons who join together to carry on a trade or business. Each partner contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

The term `partnership' includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on.

An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants.

Husband and Wife Businesses - Sole Proprietorship or Partnership?

Many small businesses are operated by husband and wife, without incorporating or creating a formal partnership agreement. A husband and wife business may be a partnership, whether or not a formal partnership agreement is made. However, see the information below regarding legislation designed to reduce taxpayer burden for husband and wife businesses.

The Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that for tax years beginning after December 31, 2006, a qualified joint venture conducted by a husband and wife who file a joint return is not rated as a partnership for federal tax purposes. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a general or limited liability company).

If a husband and wife materially participate as the only members of a jointly owned and operated business, and file a joint federal income tax return (Form 1040), they can elect for the business to be taxed as a qualified joint venture instead of a partnership. To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interests in the venture, and reported on separate Schedules C or F as sole proprietors.

Spouses who meet these qualifications and require EINs should submit separate Forms SS-4 as sole proprietors. Do not apply for a joint EIN as a "Qualified Joint Venture".

Note: If your spouse is your employee, not your partner, you must pay Social Security and Medicare taxes for him or her.

Form(s):

A partnership files Form 1065, U.S. Partnership Return of Income, plus other returns that apply (such as employment or excise tax returns).

You will need a new EIN if any of the following are true:

Definitions:

Estate: An estate is a legal entity created as the result of a person's death. The decedent's estate is a separate legal entity for federal tax purposes. An estate consists of real and/or personal property of the deceased person. The estate pays any debts owed by the decedent and then distributes the balance of the estate's assets to the beneficiaries of the estate. The estate exists until the final distribution of the assets is made to the heirs and other beneficiaries.

Fiduciary: A fiduciary is any person acting in a fiduciary capacity for any other person. A fiduciary for a decedent's estate can be an executor, administrator, personal representative, or person in possession of property of a decedent's estate. The primary duties of the fiduciary are to collect all the decedent's assets, pay the creditors, and distribute the remaining assets to the heirs or other beneficiaries.

Form(s):

Definitions

Trust: A trust is an arrangement through which trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts. A trust is a legal entity created under state law and taxed under federal law. A trust may be created during an individual's lifetime (inter vivos) or at the time of his or her death under a will (testamentary). Trusts include guardianships, custodianships, conservatorships, receiverships, escrow accounts, Ginnie Mae (GNMA) and Fannie Mae (FNMA) pools.

Fiduciary/Trustee: A fiduciary is an individual or organization charged with the duty to act for the benefit of another. A trustee is a fiduciary. The trustee obtains legal title to the trust assets and is required to administer the trust on behalf of the beneficiaries according to the express terms and provisions of the trust agreement.

Beneficiary: A beneficiary is a person designated as a recipient of funds or other property under a trust or an estate.

Grantor: The grantor (also known as trustor, settlor, or creator) is the creator of the trust relationship and is generally the owner of the assets initially contributed to the trust. The grantor generally establishes, in the trust instrument, the terms and provisions of the trust relationship between the grantor, the trustee, and the beneficiary. The grantor may retain control over all or a portion of the trust, which may result in the grantor being subject to tax on the income from that portion of the trust.

Revocable/Irrevocable Trust: An irrevocable trust is a trust, which, by its terms, cannot be modified, amended, or revoked. For tax purposes, an irrevocable trust can be treated as a simple, complex, or grantor trust, depending on the powers listed in the trust instrument. A revocable trust may be revoked and is considered a grantor trust (IRC § 676). State law and the trust instrument establish whether a trust is revocable or irrevocable. If the trust instrument is silent on revocability, then most states consider the trust revocable.

Living Trust: A living person creates an inter vivos trust during that person's life-time. An inter vivos trust can be established as revocable or irrevocable. An inter vivos trust can be a simple, complex, or grantor trust depending on the trust instrument.

Testamentary Trust: A testamentary trust is created by a will, which begins its existence upon the death of the person making the will, when property is transferred from the decedent's estate. Testamentary trusts are generally simple or complex trusts. A testamentary trust is irrevocable by definition, as it comes into being at the death of the grantor. A "trust under the will' is the same as a testamentary trust.

Conservatorship: A trust, not an estate, which is usually set up for an incompetent person.

Guardianship/Custodianship: A trust usually set up for a minor.

Form(s):

Form 1041 U.S. Fiduciary Return of Income, plus other returns that apply (such as employment tax returns).

You will need a new EIN if any of the following are true:

Employee Plans

Definitions:

Employee Benefit Plan: An employee benefit plan is a permanent arrangement under which an employer provides retirement or health benefits for employees. Some of these include: cafeteria plans, defined benefit plans, and defined contribution plans. The employer/sponsor and/or the plan administrator file the applicable returns.

Plan Sponsor: The plan sponsor is the entity that establishes and maintains a benefits plan. The plan sponsor is usually an employer, but may also be an employee organization created for the purpose of offering benefits. If the plan is a "multi-employer plan," the committee or other entity that established the plan is considered the plan sponsor.

Plan Administrator: The plan administrator is the person or company who handles day-to-day details of operating a health benefit or pension plan, such as processing claims for benefits, employer and employee contributions, record-keeping, and reports. The administrator is usually identified in the plan creation documents.

Note: If you are reporting withholding on pension distributions, be sure to be consistent in using the same name and EIN for all reporting and depositing of taxes, i.e. Forms 945, 1099-R, and 8109/EFTPS. Filing Form 945 with an incorrect name or EIN or failure to use the same name and EIN in all reporting and depositing of taxes may result in penalties and delays in processing your return.

Form(s):

Employee plans usually file Form 5500 series returns plus other returns that apply (such as employment or excise taxes). The major employee plan forms are listed below.

Note: If the employer/sponsor entity already has an EIN, use that number on all Form 5500 series returns.

Exempt Organizations

Definitions:

Tax Exempt Organization: A tax exempt organization is a non-profit organization that is exempt from certain taxes because it is described under Section 501 of the Internal Revenue Code. Certain organizations are required to apply to the Internal Revenue Service for a determination letter that grants them formal tax exemption, while other organizations are treated as tax exempt as long as they are organized and operated under an applicable section of the Code.

IRC Section 501(c)(3) Organization: This is an organization that is organized and operated exclusively for one or more of the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment), or the prevention of cruelty to animals. To qualify, the organization must be a corporation, community chest, fund, unincorporated association, or foundation. A trust is a fund or foundation and will qualify. However, an individual or a partnership will not qualify.

Organizations not required to apply for formal tax exempt status: Some organizations are treated as tax exempt under IRC Section 501(c)(3) without being required to file Form 1023, provided they are organized and operated appropriately. These include:

Private Foundation vs. Public Charity: Most organizations that are exempt from income tax under IRC Section 501(c)(3) are presumed to be private foundations, unless they notify the Internal Revenue Service within a specified period of time that they are not. In effect, the definition divides organizations into two classes, namely private foundations and public charities. There is an excise tax on the net investment income of most domestic private foundations. In addition, there are several other rules that apply.

See Publication 557 for a chart listing many other categories of exempt organizations.

Organizations seeking formal recognition of their exempt status must generally file one of the applications listed below with the Internal Revenue Service and must pay the required user fee. Requests for exemption under subsections other than 501(c) (3) must include Form 8718, User Fee for Exempt Organization Determination Letter Request. Requests should be sent to the address shown on Form 1023 and on Form 8718. To decide which application form listed below is needed for your organization, refer to Publication 557, Tax-Exempt Status for Your Organization.

All publications and forms mentioned above are available for download from the IRS website, http://www.irs.gov, or by calling our toll-free number 1-800-TAX-FORM.

Group Exemption Letter: A group exemption letter is a ruling or determination letter issued to a central organization recognizing, on a group basis, the exemption of subordinate organizations on whose behalf the central organization has applied for recognition of exemption. A central organization is an organization that has one or more subordinates under its control. A subordinate organization is a chapter, local, post, or unit of a central organization.

Public Disclosure of Forms 990: Exempt organization Forms 990 are required to be made available to the public. Procedures for obtaining this information are found in Publication 557, Tax-Exempt Status for Your Organization, and Form 4506A, Request for Public Inspection or Copy of Exempt or Political Organization. In addition, submitted Forms 990-N are made available on the IRS website, http://www.irs.gov.

Unrelated Business Income: Even though an organization is recognized as tax-exempt, it still may be liable for tax on its unrelated business income. Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption.

Form(s)

Exempt organizations usually file a Form 990 series return plus other returns that apply (such as employment or excise tax returns). The exempt organization forms are listed below:

Limited Liability Company (LLC)

Definition: A limited liability company (LLC) is an entity formed under state or foreign law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts.

LLC Tax Classification: Treas. Reg. Section 301.7701-3 provides guidance on classification for limited liability companies. Generally, if the business is an unincorporated business entity, and there are two or more owners, the entity can choose to be a partnership or a corporation. If an unincorporated business entity has only one owner, it can either elect to be a corporation or the entity can be disregarded. If an individual owns a disregarded entity, it is treated as a sole proprietorship. If a corporation owns a disregarded entity, it is treated as a division or branch of the corporation. See Form 8832, Entity Classification Election, for more details.

Note: While a single member entity, that does not elect corporate status, will default to a disregarded status for some federal tax purposes, it will not be disregarded for all federal tax purposes. For federal employment taxes (after January 1, 2009) and certain excise taxes (after January 1, 2008) it will be treated as a separate entity.

Single Member LLC:

A single member LLC generally has the following choices:

A multiple member LLC generally has the following choices:

If you are organized as a limited liability company and require an EIN, please refer to the instructions for Form SS-4 for information on completing the form or apply online using the Internet EIN application available at http://www.irs.gov and select "Limited Liability Company" as the type of entity you are establishing.

Employment and Excise Taxes

Employment Taxes

Definition:

If you have one or more employees, you will generally be required to withhold federal income tax from their wages. You also may be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA).

If you are required to report employment taxes or give tax statements to employees or annuitants, you need an employer identification number (EIN).

Form(s):

Social security, Medicare, and withheld income tax are usually reported on Form 941, Employer's QUARTERLY Federal Tax Return. The exceptions are:

Non-payroll items, including backup withholding and withholding for pensions, annuities, IRAs, and gambling winnings are reported on Form 945, Annual Return of Withheld Federal Income Tax. The return is due January 31 of the following year.

Report Federal Unemployment Tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

Excise Taxes

Definition:

Excise tax is a tax on the manufacture, sale, or consumption of a specific commodity. Examples are: fuel taxes, environmental taxes, and communications and air transportation taxes.

Form(s):

Most excise taxes are reported on Form 720, Quarterly Federal Excise Tax Return. Certain excise taxes are reported on different forms and to other organizations. Those excise taxes and forms are:

You can apply for an EIN online, by fax, or mail depending on how soon you need to use the EIN

Apply Online

Note: This is a free service offered by the Internal Revenue Service at http://www.irs.gov. Beware of websites on the internet that charge for this free service.

The internet is the preferred method to use when applying for an EIN. Visit the IRS website at http://www.irs.gov (keyword "EIN") and check out the Interview-style online EIN application. The application includes embedded help topics and hyperlinked keywords and definitions so separate instructions aren't needed. The information you submit is validated during the online session. Once you've completed the application, you will receive your EIN immediately. You can then download, save, and print your confirmation notice. (This feature is not available to Third Party Designees.) The online application is fast, free, and user-friendly!

The application is available during the following hours:

Monday - Friday 7:00 a.m. to 10:00 p.m. Eastern time

The online application is available for all entities whose principal business, office or agency, or legal residence (in the case of an individual), is located in the United States or U.S. Territories. Additionally, the principal officer, general partner, grantor, owner, trustor etc. must have a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number) in order to use the online application.

Apply by Fax

You can receive your EIN by fax within four (4) business days. Fax your completed Form SS-4 to the fax number listed for your state under "Where to Apply" in this publication. The fax number is available 24 hours a day, 7 days a week. Be sure to provide your fax number so that an IRS representative can fax the EIN back to you. Do not fax an application and also call the EIN toll-free number for the same entity because a duplicate EIN may be assigned. By using this method, you are authorizing IRS to fax your EIN without a cover sheet.

Apply by Mail

You can receive your EIN by mail within about four (4) weeks. Ensure that the Form SS-4 contains all of the required information and mail the application to the address listed under "Where to Apply" in this publication. An EIN will be assigned and mailed to you.

How to Complete Form SS-4, Application for an EIN

If you choose to apply online, you will not need a Form SS-4. Otherwise, you can download Form SS-4 and separate instructions by accessing the IRS website at http://www.irs.gov or call 1-800-TAX-FORM to request the form and instructions by mail. You can also visit your local IRS office.

Special Characters In Your Business Name:

The only special characters IRS systems can accept in a business name are: 1) alpha (A-Z), 2) numeric (0-9), 3) hyphen (-) and 4) ampersand (&). If the legal name of your business includes anything other than those listed above, you will need to decide how best to enter your business name into the online EIN application or on Form SS-4.

If your legal name contains a symbol or character such as a "plus" symbol (+) or a period (.) you could spell out the symbol and leave a space. Jones.com could be submitted as Jones Dot Com or Jones Com. The backward (\) or forward (/) slash can be substituted with a hyphen (-). If your business name contains an apostrophe ('), drop the apostrophe and do not leave a space.

Third Party Designee:

No matter what method you use to apply, if a third party is making the application for an EIN, the taxpayer must authorize the third party to apply for and receive the EIN.

Read the instructions for Form SS-4.

After reading the instructions, find your entity type (sole proprietor, corporation, partnership, etc.).

Note: This is not an election for a tax classification. See Form 8832, Entity Classification Election, for tax classification information.

The Internal Revenue Service has become aware that nominee individuals are being listed as principal officers, general partners, grantors, owners, and trustors in the Employer Identification Number (EIN) application process. A nominee is not one of these people. Rather, nominees are temporarily authorized to act on behalf of entities during the formation process. The use of nominees in the EIN application process prevents the IRS from gathering appropriate information on entity ownership, and has been found to facilitate tax non-compliance by entities and their owners.

The IRS does not authorize the use of nominees to obtain EINs. All EIN applications (mail, fax, phone, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the "responsible party," controls, manages, or directs the applicant entity and the disposition of its funds and assets.

Follow the line-by-line instructions below to complete Form SS-4 for your entity type.

Sole Proprietor/Individual

 Line 1      Enter your first name, middle initial and last name

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The sole proprietor must sign the application if the Third Party Designee section is completed.

Corporation

 Line 1      Enter the corporate name as it appears on the corporate

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The president, vice president, or other principal officer must sign the application if the Third Party Designee section is completed.

Note: If you wish to elect S-corporation status, you must file Form 2553, Election by a Small Business Corporation.

Partnership

 Line 1      Enter the name of the partnership as it appears in the

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: A responsible and duly authorized member or officer having knowledge of the partnership's affairs must sign the application if the Third Party Designee section is completed.

Trust

 Line 1      Enter the exact name of the trust as it appears on the

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The trustee or other authorized fiduciary must sign the application, if the Third Party Designee section is completed.

GNMA POOLS (Governmental National Mortgage Association)

Note: The EIN Stays with the "GNMA Pool" if it is traded from one financial institution to another.

 Line 1      Enter the pool number. Do not enter leading zeros. For

Name and Title: Print your name and title of the fiduciary.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The trustee or other authorized fiduciary must sign the application if the Third Party Designee Section is completed.

Estate

 Line 1      Enter the first name, middle initial and last name of the

Name and Title: Print the name and title of the fiduciary.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The fiduciary must sign the application if the Third Party Designee section is completed.

Note: If you use an estate to create a trust, the trust is considered a different entity type and a new EIN is needed.

Plan Administrators

Note: If the plan administrator already has an EIN, use that number. A new EIN is not needed.

 Line 1      Enter the name of the plan administrator.

Name and Title: Print the plan administrator's name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: A responsible and duly authorized member or officer with the knowledge of plan's affairs must sign if the Third Party Designee section is completed.

Employee Plans

 Line 1      Enter the name of the plan.

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: A responsible and duly authorized member or officer with knowledge of the plan's affairs must sign if there is a Third Party Designee.

Exempt Organizations

 Line 1      Enter the legal name of the exempt organization.

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: A responsible and duly authorized member or officer having knowledge of the exempt organization's affairs must sign the application if there is a Third Party Designee.

Bankruptcy (Individual)

Bankruptcy proceedings begin with the filing of a petition with the bankruptcy court. The filing of the petition creates a bankruptcy estate, which generally consists of all the assets of the person filing the bankruptcy petition. A separate taxable entity is created if the bankruptcy petition is filed by an individual under Chapter 7 or Chapter 11 of the Bankruptcy Code.

Note: A married couple who file a joint bankruptcy petition require separate EINs for federal tax purposes.

 Line 1      Enter the first name, middle initial and last name of the

Name and Title: Print your name and title.

Telephone Number: Enter the telephone number where we can reach you if we have questions about your application.

Signature: The bankruptcy trustee, receiver, or debtor in possession must sign the application if there is a Third Party Designee.

Bankruptcy (Corporation or Partnership)

A separate taxable estate is not created when a partnership or corporation files a bankruptcy petition. The court appointed trustee is, however, responsible for filing the regular income tax returns on Form 1065 or Form 1120.

If you are a bankrupt/liquidated corporation or partnership, you do not need a new EIN. Send the name of the trustee/receiver of the bankruptcy to your IRS service center so we can add that information to your existing EIN account.

EFTPS (Electronic Federal Tax Payment System)

Start your business off right. A Secure Way to Pay All Your Federal Taxes

EFTPS is a tax payment system provided free by the U.S. Department of Treasury. Pay federal taxes electronically -- on-line or by phone 24/7. Businesses and Individuals can pay all their federal taxes using EFTPS. Individuals can pay their quarterly 1040ES estimated taxes electronically using EFTPS, and they can make payments weekly, monthly, or quarterly as well as schedule payments for the entire year in advance.

To enroll or for more information online, visit the EFTPS website at https://http://www.eftps.gov/eftps/, or to receive an enrollment form, call EFTPS Customer Service:

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Applications submitted by fax will be processed within 4 business days.

If you have not been notified of your EIN assignment within the normal processing timeframe, please call the IRS Business and Specialty Tax Line at 1-800-829-4933 for assistance.

If you have not received your EIN by the time you need to file a return, write: "Applied For" in the space provided for the EIN.

Avoiding Common EIN Problems