Here’s what to know about records to hang on to and how long you should keep them.
What is an Employer Identification Number?
An Employer Identification Number (EIN) is a nine-digit number assigned to businesses by the Internal Revenue Service (IRS) for tax purposes. EINs are assigned to sole proprietorships, business owners with employees, corporations, partnerships, nonprofit entities, trusts, estates and government agencies.
Like a Social Security Number (SSN) or an Adoption Taxpayer Identification Number (ATIN) for individuals, the IRS assigns EINs in order to organize tax payments. The number identifies a company as an employer and allows the company to submit information about wages and salaries paid out to employees.
Note that sole proprietorships without employees are not required to have an EIN. If a business has one or more employees, it must have an EIN. Businesses identify themselves with EINs on tax returns, business licenses, business permits, and a variety of other government applications and forms. They also use it when opening a business bank accounts and taking out loans.
Find the tax forms and information needed to run your business at the IRS Tax Forms center on Bankrate.com.
Example of an EIN
Doris is establishing a retail business. She plans to hire a few people to help her run the business. She knows that she will need to send the IRS documentation of the income she pays these individuals as well as taxes over the course of the year. She files for an EIN through the IRS website. She receives a nine-digit number that ensures she can file this information correctly.