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Employee Identification Number Laws and Regulations

Make sure your business is IRS-compliant with an Employee Identification Number

By Virginia Franco, Freelance Writer
An Employee Identification Number, often referred to by the abbreviation EIN, is a nine-digit number with which the Internal Revenue Service (IRS) identifies your business for tax purposes. In most cases businesses require an EIN in order to exist and to pay taxes. Also known as a federal tax ID number, it is used by those whose businesses can be classified as a sole proprietorships, corporations, partnerships, non-profit organizations, trusts or estates.

There are a few critical Employee Identification Number laws and regulations that you should be familiar with to make sure your business is off on the right foot as far as the IRS and the federal government are concerned. Make sure you are knowledgeable about, or have taken the proper steps, in regard to the following Employee Identification Number topics:

1. Select an acceptable option as dictated by Employee Identification Number laws and regulations when applying for an EIN.

2. Make sure to satisfy any state-specific employee identification laws and regulations based on where your business is located.

3. Keep tabs on updated Employee Identification Number laws and regulations.

 

Select a proper option for applying for an Employee Identification Number

The IRS allows Employee Identification Number applicants four methods to submit an application: Online, by phone, by mail or by fax. Online submission is preferable and will give you the quickest results.
Try: The IRS website is a great resource that contains detailed information about the various ways to apply for an Employee Identification Number. It also contains information about other EIN regulations. Small Business Notes summarizes the four application options for EIN applications and explains the area of third-party authorization.

Satisfy any state-specific Employee Identification Number laws and regulations

To run a business properly with all the T's crossed and the I's dotted, it is important to meet federal and state requirements for taxation. This means checking with the state where your business will be located to make sure you are in compliance with any laws and regulations around new business establishment.
Try: If you are considering starting a business in California, refer to the State of California's Employment Development Department website, which includes links to state requirements for businesses. For those starting up in New York, be sure to read through the Division of Corporations page that discusses requirements for specific business types operating in New York State.

Keep abreast of updated Employee Identification laws and regulations

Similar to other laws and regulations, those governing EINs are subject to changes and updates. It is important to keep abreast of these changes to ensure your business is in full compliance where the IRS is concerned.
Try: CPA-Resource and the Louisiana Law Blog discuss some changes that took effect in January 2009 regarding disregarded entities.

 

  • Aside from establishing a new business, there are a few other unique circumstances that also require an Employee Identification Number. For instance, if you must administer an estate formed as a result of a person's death, or are changing the legal structure of an existing business (i.e. from an partnership to a corporation), you will need to get a new EIN.

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