Applying for an Employer Identification Number (EIN), a unique 9-digit ID issued by the Internal Revenue Service (IRS) by filing Form SS-4, is important to fulfill tax obligations, meet legal and regulatory requirements, facilitate hiring and payroll processes, establish business credit, protect personal information, and comply with nonprofit and tax-exempt regulations. It is a fundamental step in establishing and operating a business or organization in compliance with applicable laws and regulations.
Key Takeaways
- Every U.S. business needs to apply for an EIN from the IRS.
- All companies need to have an EIN in order to open business bank and payment processing accounts, apply for loans, pay employees, and of course, file taxes.
- Anyone who makes payments to your company will also need an EIN from Form SS-4 reported on Form W-9 in order to get paid.
What is form SS-4 used for?
Form SS-4 is used to apply for a unique nine-digit tax identification number issued by the IRS. An EIN is assigned to businesses, nonprofit organizations, estates, trusts, and other entities for tax-related purposes. All businesses should file Form SS-4 if they want to receive or make payments.
Who has to file Form SS-4?
Corporations, sole proprietorships, partnerships, limited liability companies (LLCs), and other types of business entities use Form SS-4 to obtain an EIN. This number is required for various tax-related activities, such as filing tax returns, opening business bank accounts, hiring employees, and applying for business licenses. Estates, trusts, certain individuals, and other entities such as non-profits should also apply.
When should a company file Form SS-4?
An application for an EIN should be made when starting a business prior to any transactions being conducted. A company should file Form SS-4 when:
- Starting a new business: When you establish a new business entity, such as a corporation, partnership, LLC, or sole proprietorship, you generally need to obtain an EIN. You should file Form SS-4 before commencing business activities or as soon as possible thereafter.
- Hiring employees: If your company plans to hire employees, an EIN is required for various employment tax obligations. You should file Form SS-4 before hiring employees to ensure compliance with tax withholding, reporting, and payment requirements.
- Establishing a retirement plan: If your company intends to establish a retirement plan, such as a 401(k) or pension plan, you may need an EIN for the plan. The EIN is used for tax reporting and administrative purposes. In this case, you should file Form SS-4 before implementing the retirement plan.
- Changing business structure: If your business undergoes a change in structure, such as converting from a sole proprietorship to an LLC or incorporating a partnership, you will need to obtain a new EIN. You should file Form SS-4 when the change in structure takes effect.
- Other specific circumstances: There may be other situations where obtaining an EIN is necessary or beneficial. For example, if your company is acquiring an existing business, establishing a trust or estate, or forming a subsidiary, you may need to file Form SS-4.
It’s important to note that the timing for filing Form SS-4 may vary based on the specific circumstances and requirements of the business.
Where is Form SS-4 filed?
Form SS-4 can be filed with the IRS through several methods:
- Online: The preferred and most convenient method is to file Form SS-4 online. The IRS Online EIN Assistant issues an EIN upon completion.
- Fax: You can fax Form SS-4 to the appropriate fax number for your state, as listed in the instructions.
- Mail: Mail Form SS-4 to the appropriate IRS address, depending on your state, found in the instructions.
Form SS-4 processing times may vary. Filing online provides immediate EIN issuance in most cases. Fax and mail filings take a few weeks.
Where do I find the latest version of Form SS-4?
The newest version of the form can be found on the IRS website at IRS.gov.
How do I find the instructions for Form SS-4?
Instructions for Form SS-4 can be found online on the IRS website at IRS.gov, as the form and instructions are usually found in the same document.
Why is it important to apply for an Employer Identification Number?
Applying for an EIN is important for several reasons:
- Tax purposes: An EIN is used by the IRS to identify businesses and other entities for tax-related purposes. It is necessary for filing tax returns, reporting income, and fulfilling various tax obligations. Having an EIN ensures that your business or entity can comply with tax laws and regulations.
- Legal and regulatory requirements: Many legal and regulatory requirements apply to businesses and organizations, and having an EIN is often a prerequisite for meeting these obligations. For example, when starting a business, obtaining an EIN is necessary for registering with government agencies, applying for licenses and permits, and opening business bank accounts.
- Hiring employees: If you plan to hire employees, an EIN is required to fulfill various employment tax responsibilities. This includes reporting wages, withholding income taxes, paying payroll taxes, and issuing W-2 forms to employees. An EIN is also needed for other employment-related matters, such as setting up retirement plans and administering employee benefits.
- Establishing business credit: Having an EIN can help separate your personal and business finances. It allows you to build a business credit history, which may be beneficial when seeking business loans, lines of credit, or other forms of financing. An EIN provides a distinct identifier for your business, helping lenders assess its creditworthiness.
Are there penalties for mistakes in filing Form SS-4?
There is no such thing as a “late filing” penalty, but there can be secondary penalties for mistakes or inaccuracies in filing Form SS-4. It’s important to ensure that the information provided on the form is accurate and complete to avoid potential penalties or delays in processing. Here are some potential consequences of errors on Form SS-4:
- Rejection or delayed processing: If the IRS identifies errors or incomplete information on Form SS-4, they may reject the application or delay its processing. This can result in a longer wait time for your EIN to be received.
- Miscommunication with the IRS: Mistakes on Form SS-4 can lead to miscommunication between the IRS and your business or entity. This can cause confusion, delays, and potential errors in tax reporting, correspondence, or other communications.
- Tax compliance issues: Inaccurate information on Form SS-4 can create problems with tax compliance. For example, providing incorrect details about the business structure or ownership may lead to incorrect tax classification, which could result in incorrect tax reporting and potential underpayment or overpayment of taxes.
- Penalties and fines: If the IRS determines that mistakes on Form SS-4 were intentional or negligent, they may assess penalties or fines.
To minimize the risk of mistakes on Form SS-4, it’s advisable to carefully review the form before submitting it to the IRS. Double-check all information, including the legal name of the entity, the business structure, and the responsible party’s details.
What information is required to file Form SS-4?
No documents need to be submitted other than the form. The information required can vary based on the type of entity and the circumstances of your application. The following information may be necessary:
- Legal name and structure: The legal name of the business or entity applying for the EIN must be provided. For different types of entities, such as corporations, partnerships, LLCs, or sole proprietorships, additional information related to the structure and formation may be required.
- Responsible party information: The responsible party is the individual or entity that controls, manages, or directs the applicant’s funds and affairs. Provide the responsible party’s name, Social Security number (SSN) or individual taxpayer identification number (ITIN), along with their title.
- Address: Provide the physical address of the business or entity. This should be the address where the entity conducts its activities or maintains its records.
- Business purpose: A brief description of the business or entity’s primary activity or purpose is often required, to help the IRS understand the nature of the entity’s operations.
When do I NOT need to apply for an Employer Identification Number?
There may be instances where you don’t need to file Form SS-4. For example, if you are a sole proprietorship without employees and don’t have any specific requirements for an EIN, you may use your Social Security number for tax purposes instead.
How do I prepare Form SS-4?
Prepare the form by providing your legal name and address, type of entity, reason for applying, business activity, and answering all the questions that pertain to your situation.
How long does it usually take to prepare the form?
Form SS-4 asks for basic information and should only take a few minutes to complete.
What are common errors in completing Form SS-4?
The most common error when applying for an EIN is name conflict (i.e, the name provided is already associated with an EIN. Entity names should be unique. Here are some other common errors to watch out for:
- Incorrect entity name or structure: Providing an incorrect legal name of the entity or selecting an incorrect entity structure can cause delays or complications. Ensure that you provide the accurate legal name of the entity as it appears on official formation documents.
- Inaccurate responsible party information: The responsible party is the individual or entity that controls, manages, or directs the applicant’s funds and affairs. Providing incorrect or incomplete information such as name, SSN, or title, can lead to processing issues.
- Errors in address: Providing an incorrect or incomplete address for the entity can cause difficulties in delivery of important documents from the IRS.
- Lack of signature: Don’t forget to sign the form or they will send it back to you!
- Incorrect business purpose description: Providing an unclear or inaccurate description of the business purpose or activity can lead to misclassification of the entity for tax purposes. Be specific in describing the primary nature of the entity’s operations.
- Omission of required attachments or documentation: If the entity is a foreign business, additional documentation may be needed. Ensure that you include any required attachments as outlined in the instructions for Form SS-4.
To avoid these errors, carefully review the form and instructions before submitting it.
Do you have any tips for filing form SS-4 correctly?
Double check all your answers to make sure you provide accurate information about your business. Use your operations address, and not the address of your Registered Agent, if you use one.
What if I file form SS-4 late?
Technically, there is no late date for filing form SS-4 but you may not be able to open business bank accounts, request business loans, or satisfy your tax filing requirements until you have an EIN.
Can Cleer Tax help me file form SS-4?
Yes, our qualified tax professionals can fill out Form SS-4 and submit it for you. We will double-check all information provided, verify the accuracy of names, numbers, and addresses, and ensure that any required attachments are included. The fee for this service is $250.
Cleer provides accurate, affordable, and efficient financial and tax services for U.S. businesses and subsidiaries, assisting entrepreneurs to do it right from the start. Every flat-rate Cleer Corporate Income Tax Package includes BOTH Federal and State income tax filings. If you do business in more than one state, each additional state is only $175.
We also offer all-inclusive bookkeeping packages that include monthly statements as well as your federal and state tax returns. If you have any other questions about forming your company or how to maximize your tax savings, schedule a consultation to discuss the best structure for your startup business, regardless of the state in which you register.
For more information, visit our pricing page or feel free to contact us.
