Similar in function to the Social Security number assigned to people, EINs are used by companies, sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain people and other business things. The IRS uses this number to identify.
People who are companies may select to either use their Social Security number with the aim of reporting taxes withheld on behalf of their workers or get an EIN. Credit issuers and contrary to some misconceptions, credit bureaus can tell the difference between EIN and SSN numbers. SSN numbers can be validated as to state and source /year of issuance.
Issuers and the credit bureaus are exceptionally trained in fraud detection, and protections and refined algorithms are used. This is the reason many companies isn’t considered sensitive information, and freely distribute the EIN by way of publications and the web.
EIN Number Format
Reg. 9946 . The ability for EIN’s is derived from 26 USC 6011(b), demanding citizen id with the aim of payment of employment taxes. The provision was enacted in 1954 as part of the revision of the Tax Code. 26 USC 6109 extended in 1961 this power.
An EIN is generally written in the form 00-0000000 whereas a Social Security Number is generally written in the form 000-00-0000 in order to distinguish between them both. There are EIN Decoders online that can identify in what state the business filed the EIN.
An EIN is needed by a company to file business tax returns and in order to pay workers. To be considered a Venture, LLC, Corporation, S Corporation, Nonprofit, etc. a company must obtain an EIN. Additionally, financial institutions including brokerage houses, credit unions, and banks Won’t start an account for a corporation without an EIN.
Since all corporations – including ones without a income – must file a federal income tax return, a corporation incorporated in America or running ordinarily must get an EIN anyhow before or after being issued its charter.
Prior to 2001, the first two digits of an EIN (the EIN Prefix) suggested the company was found in a specific geographic area. At three of the IRS campuses, EIN allocation was centralized in 2001, although all 10 campuses can assign an EIN, if required.