Glossary
What is an EIN?
An EIN is a federal tax ID the IRS issues to businesses. Learn who needs one, how to get it free from the IRS, and when to put it on an invoice.
Updated · By PayToMe Editorial
An EIN, or employer identification number, is a federal tax ID that the IRS assigns to businesses, tax-exempt organizations and other entities. It identifies your business for federal tax purposes, much as a Social Security number identifies a person.
How it works
The IRS describes an EIN as a federal tax ID for businesses and other entities, and you can get one for free directly from the IRS. According to the IRS, you need an EIN if you have employees, or if you are a partnership, LLC, corporation, tax-exempt organization, estate, trust or retirement plan, among other cases. You can also request one for banking or state tax purposes even if you do not need one federally.
Typical uses of an EIN:
- Opening a business bank account.
- Hiring employees and filing payroll taxes.
- Filing business tax returns.
- Giving to clients who need your taxpayer details on a Form W-9.
- Applying for business credit or licenses.
An EIN is not the same as a state sales tax permit, and it is not a VAT number, which is a different identifier used in other countries. Your EIN is one kind of tax ID.
To apply, use the IRS’s official online application. You will need to name a responsible party, who must provide an SSN, ITIN or EIN. Only one EIN can be issued per day per responsible party, according to the IRS. If you form an LLC or corporation, register it with your state first.
Example
A freelance illustrator named Priya works as a sole proprietor and starts hiring a part-time assistant.
You can create a professional invoice with the free invoice generator, and check sales tax amounts with the sales tax calculator.
Tips
- Apply directly through the IRS and avoid paying third-party sites.
- Store your EIN confirmation letter safely.
- Share your EIN only with parties that need it, such as clients sending you payments that require tax reporting.
- Confirm current IRS guidance before you apply, since procedures can change.
Related terms
- Tax ID: the broader category of tax identifiers.
- KYB: know your business, a check that may ask for an EIN.
- Sales tax: a separate state-level tax.
- VAT number: the tax ID used for VAT in other countries.