Legal-Ease: What are EIN/TINs, and when are they needed?

The IRS will issue unique numbers to identify various businesses, trusts and relationships. These numbers are referred to as Employer Identification Numbers. Sometimes the EIN will also be called the federal Tax Identification Number, and this TIN is the same thing as an EIN.

EINs can be thought of as Social Security numbers for businesses, trusts, etc. EINs are comprised of two digits followed by a hyphen and then seven digits, making them nine digits total.

The most common way to reserve a EIN is usually from the IRS via the IRS website. The IRS will also allow for an EIN to be obtained by fax filing as well. If a name for an entity seeking an EIN is similar to the name of another entity that already has an EIN, the IRS website usually denies the EIN request and requires that the application for the EIN be filed by fax. When an EIN is filed by fax, it allows an employee of the IRS to re-check the circumstances and avoid double-approving the EIN. This also helps avoid any eventual confusion on the IRS’s end.

Not all businesses are required to get an EIN. A sole proprietorship (business with one owner), whether organized as an LLC or not, is not usually required to get an EIN. However, most sole proprietorships do secure an EIN to streamline the business’s reporting to the IRS. Having or not having an EIN does not affect actual tax obligation amounts.

Multiple-owner businesses like most corporations, partnerships and LLCs are required to get an EIN to do business in the United States. This EIN will be used for more than just IRS tax reporting, it will also be used for banking (such as opening a bank account) and for the business to conduct day-to-day operations.

An irrevocable trust can also be required to get an EIN. This is primarily because some irrevocable trusts can become taxable entities themselves due to having multiple beneficiaries (owners). Even if a trust has only one beneficiary/owner, if the trust is irrevocable, the IRS often treats the trust as a taxable entity because it allows the IRS to track the money paid into the trust (and made subject to the trust rules) to ensure that that money is timely distributed to the beneficiaries.

Sometimes even when a business has an EIN, said business has to apply for a new EIN when a triggering event occurs. One triggering event is if a business with an EIN goes from having a single owner to multiple owners, or vice versa, that business will be required to get a new EIN.

For farmers and farmland owners, many circumstances require them to get an EIN that for non-farmers and farmland owners would not require an EIN. This is largely because the software used by the Farm Service Agency of the USDA requires detailed organization and reporting of indirect ownership interests. This detailed organization and reporting information is used by the Farm Service Agency to ensure that no individual person receives more than the maximum annual subsidy amount allowed by the federal government.

Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.