Employer Identification Numbers Explained - The KZ Group, LLC

In the United States and Employer Identification Number (or EIN) is the corporate version of a social security number. Also known as a FEIN or Federal Employer Identification Number (and sometimes known as a TIN when used for identification) it will be issued to anyone (and that included individuals) who has to pay employees withholding taxes.

The EIN is a nine digit number assigned by the IRS and used by business entities, government agencies, trusts and estates, partnerships, non-profit organizations, sole proprietors and employers. The IRS uses the EIN number to record those taxpayers who need to file a number of different tax returns for their businesses. Those individuals who are classed as employers can opt to either use their social security number or obtain an EIN when it comes to reporting taxes withheld for their employees. Credit bureaus and credit issuers are able to tell the difference between SSN and EIN numbers, contrary to popular belief.

Employer Identification Numbers were created by the IRS in 1974 in order to 'require taxpayer identification for the purpose of payment of employment taxes.' The relevant provision was first adopted as part of the Tax Code Revision in 1954 and then broadened in 1961. It was agreed that the EIN would take the form 00-0000000 whilst Social Security Numbers are written as form 000-00-0000. Thus it is easy to differentiate between the two. Similarly, there are now EIN decoders on the internet that can detect which state a company has been registered in, simply by typing in the EIN.

Businesses need Employer Identification Numbers to be able to pay their employees and to be able to file business tax returns. It is essential to obtain a Employer Identification Number if the business is to be considered a LLC, Partnership, Corporation or S Corporation or a Non-Profit. Any business that does not obtain an Employer Identification Number will be classed as a proprietorship and the Operator or Owner's Social Security Number will be used on any relevant tax documents.

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