Have you started a business or are going to? Well, one of the first steps is applying for an IRS Employer Identification Number (EIN). This is a tax id number that is also needed to open business bank accounts, apply for business credit cards, or generally look more professional when applying for anything financial or tax-related.
BEWARE of the fake EIN application sites! When searching “how to apply for an EIN”, you will quickly find many website results. There are several sites that might look like the IRS site, but they are scams. The IRS site is free to apply, secure, and the only site you need.
Scam 1- Pay to File Sites
There are several of these sites that will have a form looking like you are filling out the official EIN application but once you fill in all the required sections and get to the end you discover that they are charging (often $100 or more) to file the form for you with the IRS. Not only have you just done all the work for them (instead of for yourself) but they then tell you they are not affiliated with the IRS or any other governmental agency.
The only form you need is on the official IRS website, Form SS-4 and the IRS doesn’t require any money to apply. Also, there are 4 ways to apply, but if you do so online (the US only) or by phone (International only), you will instantly have the EIN.
Scam 2- Stolen EIN numbers
Employer Identification Numbers are like a Social Security number for your business, and they should be regarded as just as precious and guarded. These are the numbers that you will use to identify your business for tax and financial purposes. Identify thieves are just as likely to go after an EIN as an individual’s SS number.
Identity Thieves can:
- File false 1099’s to get the tax refunds
- Apply for loans in your business’s name
- Apply for credit cards in your business’s name
- Hack your credit cards and run up massive debt in your business’s name
- Hack into your business’s bank accounts
The sad thing is that some sites are doing both, charging you to get the EIN and then later stealing by using your EIN.
How to Apply for the EIN Yourself
Before You Apply
Even if you do not plan to hire employees, it is best to apply for an EIN when setting up your business, regardless of what business structure you set up. Most banks will require an EIN to apply for business checking/savings accounts, business loans, or credit cards. It also makes your business look more professional in the eyes of these banks, investors, or potential purchasers.
The online process must be done in one session, so my advice is to go to the IRS website and print out an application so you can take your time finding the information that they need. This is also a good practice if filing by phone. If filing by mail or fax, you will be required to print off to fill out anyway.
The last thing to know before applying is what a responsible party is. “Responsible party” is designated by the IRS as “the person who ultimately controls the entity or who exercises ultimate effective control over the entity.” The responsible party must be an individual and not an entity. (government entity only exception)
What is On the Application
This is not some complex application form that will take days to fill out, likely 15 or less minutes answering simple questions and you have your number.
- Business Identity- what type of business structure, phase of business
- Authenticate- responsible party name and SSN/ITIN
- Address- location of the business
- Details- more about what the business does
- Confirmation
How to File if you have an LLC
The only thing that can be a little “hard” about filling out the application is for an LLC Business Structure. If you set up your business as an LLC, you will file like this:
- If Single Member LLC wishing to be taxed as a sole proprietorship, go to the “other” box and enter “disregarded entity-sole proprietorship”, this might automatically be filled out this way, but make sure
- If Multi Member LLC wishing to be taxed as a partnership, go to the box partnership and click
- If you are either and wish to be taxed as S-corp, click the corresponding box
Please consult a tax professional (Accountant or Tax Attorney) if you don’t know which to be as you are locked in for a tax cycle. You can only change this status once set for a future tax cycle prior to that cycle’s start.