The Internal Revenue Service (IRS) issues businesses and specific other entities with an Employer Identification Number (EIN), a special nine-digit number used for tax filing and reporting. While companies can register for an EIN online on their own, it is also feasible for a third party to do so on the company’s behalf.
The IRS’s online EIN application mechanism must be used if you want to apply for an EIN online as a third party. The third party will have to supply information about themselves as well as the business for which they are seeking, including the legal name, address, and entity type. The third party must also give a good cause for requesting the EIN on the company’s behalf, such as that they are a tax expert or drafting a tax return on the company’s behalf.
It is significant to remember that the third party will not be identified as the EIN’s responsible party. The person or entity that supervises, manages, or directs the business is known as the responsible party. This person or entity is frequently the business’s owner, officer, or partner. The third party may, however, be designated as the EIN’s authorized representative, enabling them to operate the EIN on the company’s behalf.
It is feasible for a business to utilize their EIN rather than an SSN when requesting credit, as opposed to using their Social Security Number (SSN). This is so because companies have their own credit histories and scores and are regarded as different legal entities from their owners. However, depending on the requirements of the lender, individual owners or partners may still be asked to disclose their personal SSN when asking for loans.
The IRS issues Individual Taxpayer Identification Numbers (ITINs), which are nine-digit numbers, to people who are not eligible for Social Security Numbers (SSNs) but who nevertheless need to file tax returns or other papers linked to taxes. Although the format of an ITIN and an EIN is identical, an ITIN is used for different things and cannot be used in place of an SSN when applying for credit.
The format of the numbers can be used to distinguish between an EIN and an SSN. While SSNs are nine numbers in the format XXX-XX-XXX, EINs are nine digits in the format XX-XXXXXX. Additionally, SSNs are used for personal identification and tax purposes whereas EINs are utilized for company tax purposes.
Finally, it’s crucial to remember that an EIN cannot be included on a W-2 form in place of an SSN. An employee’s wages and taxes withheld for the year are reported on a W-2 form, which is a tax form. For identification purposes, the form needs the employee’s SSN, and for tax reporting purposes, it needs the employer’s EIN.
A sole proprietorship is eligible to receive an EIN. In fact, a lot of single owners decide to get an EIN for a variety of reasons, including to keep their personal and business finances separate and to build credibility with customers and suppliers. You can use Form SS-4 to apply for an EIN as a sole proprietor online on the IRS website, by mail, or by fax.