Common Mistakes To Avoid When Applying For An EIN

An Employer Identification Number (EIN) is an IRS-assigned number to recognize a business entity that operates in the United States. An EIN is used for any business tax returns or legal purposes.

You may apply for an EIN by fax, mail, telephone (International applicants), or the fastest way – applying online. To apply, fill out Form SS-4, Application for Employer Identification Number. In some cases, when a certain requirement is not met, your EIN application may be rejected or you may receive an IRS reference number that indicates an error.

Here are some common mistakes to avoid when applying for an EIN.

Incomplete Or Inaccurate Information

To avoid any delays in obtaining your Employer Identification Number (EIN), be certain to prepare and submit all the required information. This information includes:

●       The legal business name

●       Your legal name

●       Business address, street address, country, and state

●       Name and Social Security Number (SSN) or TIN of the responsible party

●       Type of business structure

●       The number of members (if applying as an LLC)

●       Key business dates

●       Primary activities of the business

●       Previous application (if applicable)

Incomplete or inaccurate information about your business or its responsible party could result in a rejected application as it does not tally with the information the IRS may already have.

Multiple Applications

Applying for an EIN is an easy process, but how many EINs can someone obtain?

If you run a single business with different divisions, only one EIN is needed for the whole business entity. However, if you have multiple business entities, each of them should be treated as unique. This means one EIN per entity, as it is not possible to use the same EIN for all your business entities even though the responsible party or applicant is the same. 

Here are some best practices for obtaining more than one EIN:

●       Submit a separate SS-4 form for each additional EIN.

●       None of the forms can be dated or filed on the same day as the IRS only allows a single taxpayer to apply for one EIN daily.

●       Don’t submit multiple forms for the same business entity as repeated entries may be regarded as errors in the system.

Improper Selection Of Business Entity Type

When filling up Form SS-4, make sure to indicate the correct legal structure for your business, as each business entity is taxed differently. Those include:

●       C-Corporations

●       S Corporations

●       General Partnerships

●       Limited Partnerships

●       Multi-Member LLCs

●       LLCs Taxes as Corporations

●       Single Member LLCs with Employees

●       Sole Proprietorships with Employees

Before submitting Form SS-4, review that you have selected the correct business entity type.

Note: Single-member LLCs and sole proprietorships without employees do not need an EIN. Only an SSN is required for these business entities.

Missing A Responsible Party

All EIN applications must disclose the names and Taxpayer Identification Numbers (SSN, ITIN, or EIN) of the responsible parties as they control, manage, and direct the entity for the distribution of its assets and funds.

It is important not to exclude the details of any responsible party during the EIN application. A correct SS-4 Form should include the name, Taxpayer Identification Number, and signature of the responsible party.

If there are any changes to the responsible party for your LLC, you will need to fill up Form 8822-B (Change of Address or Responsible Party —Business) and mail it to the IRS as soon as possible.

Missing Appropriate Forms

An EIN application is easy to understand and quick to complete as there are no extra forms needed besides Form SS-4 submitted to the IRS.

You must provide the latest up-to-date information in your Form SS-4. However, if you are making changes to the business’ responsible party, address, or location, then Form 8822-B must be submitted and reported to the IRS. Include all the details of your personal and business information as they support your application process.

Applying Before Incurring Tax Liabilities

If your business is an LLC, and you wonder if you can obtain an EIN before your LLC is formed – the answer is to wait. You should ensure the name of your business is properly registered and not rejected, and when applying for an EIN, the IRS will request the approved legal name that was approved and the date the business was formed.

Most business owners form or register their LLCs with the state before obtaining an EIN.  If you apply for an EIN without registering your company with your state first, you will most likely get your EIN application rejected. We recommend waiting until your LLC is formed before applying for an EIN.

What Happens If I Make A Mistake On My Application?

Made a mistake in applying for your EIN? Here’s a guide to help you when you receive a rejection notice from the IRS:

  1. Contact the IRS, rectify the information on your Form SS-4, and send a letter to the IRS to make these changes. Be sure to complete the process by including all necessary business information in your letter along with the correct changes made.
  1. The waiting time for this process may take up to 30 days to update your current information in the government database.
  1. If this is your first time applying for an EIN and it gets rejected, you may need to review your records, make changes, and submit your application again.

Where Do I Apply For An EIN?

If you are looking to expand your business opportunities and wish to obtain an EIN, let us assist you. Apply for your EIN today.

Written by Maurice Mallory