Does a Trust need a Tax ID (EIN) Number? If so, how do you go about applying for the unique employer identification number? The determination of whether a Trust needs an EIN or not will need some research, but once you have an understanding it is important to take quick action. When you need an employer identification number or EIN, you want to get one as soon as possible. Whether you own an limited liability company, Non-Profit organization, or a pizza shop, your compliance with the Internal Revenue Service is critical and playing catch-up is never fun. Determining if an EIN is necessary for a Trust and understanding the application process is a worthy exercise.
Steps to learning about Trusts and Tax ID (EIN) Numbers :
- Do you need a tax ID number for a trust?
- What information do I need to apply for a tax ID number?
- How do I obtain a tax ID number for trust online?
- How do I obtain a tax ID number for a trust via mail or fax?
- How long does it take to get a tax ID number for a trust?
- Does a trust need a tax ID number?
To answer the first question around determining if the Trust actually needs a Tax ID (EIN) Number, you need to know about the Trust and its details. This starts with figuring out what exactly the type of Trust is. When you create a Trust, it is all about establishing a vehicle where you can transfer wealth, as well as assets between multiple beneficiaries legally. When the beneficiaries are a part of the trust, you can avoid the need for public probate.
The most applicable case for a Trust is when you want to ensure that assets get distribution under the wishes of said beneficiaries, especially after the passing. The two common types of Trusts include revocable and irrevocable.
A revocable trust is also known as a living trust. You establish this if you want to change or end the Trust at any time. An irrevocable trust is one where you are permanently transferring assets into the trust, removing your rights of ownership. You cannot change this or cancel it without the permission of the beneficiary.
When you have an irrevocable trust, you need an employer identification number. The rule for a Tax ID (EIN) Number for an irrevocable trust is important once tax returns and such need filing. For a revocable trust, you can use the grantor’s social security number if you wish. To be safe though, both should have their own Tax ID (EIN) Number.
The importance of the tax ID (EIN) number is to allow for the Internal Revenue Service to identify and trust the business and trust. You want to apply for an irrevocable trust tax ID number as soon as possible. You want to make it easy to do tax filings, manage assets, and complete financial transactions. Without the Tax ID (EIN) Number, you are going to have a difficult time doing any of this.
To obtain a Tax ID (EIN) Number for the trust, you need to name the responsible party of the trust. The responsible party is the individual that is responsible for the execution of the trust’s guidance on beneficiaries, the disbursement of assets and wealth, etc. The responsible party needs to have a unique identifier of their own, such as a social security number, as long as all important and pertinent information around the trust.
You can obtain a Tax ID (EIN) Number for a trust online through the Internal Revenue Service web site. The application process is seamless as the organization has taken the form and made it fully virtual. You can apply for the trust Tax ID (EIN) Number right over the Internet as long as you have all information at the ready.
Filing out the online form and the application in full have you submitting everything to the IRS virtually. They will receive the application online and perform a validation, which will usually take less than ten minutes. Once they do the validation, the end result is that they will return you with the nine-digit unique IRS tax identifier.
The online EIN application process is by far the easiest way to go as you can have the number back in a few minutes time and be ready to do anything else in relation to the trust in a legal fashion with adequate tracking by the Internal Revenue Service.
The process to apply for a Tax ID (EIN) Number for the trust via mail or fax packs a bit more complication. The trust application process for the employer identification number requires you to print out the form from the start. You are then completing the physical form in full, writing out all the information necessary.
Once the application is complete, if you are mailing it, you pack it in an envelope with proper postage and send it off to the Internal Revenue Service. For the fax mechanism, you are faxing the form in a complete state to the Internal Revenue Service. Once the IRS does the validation they need to complete, they will return to you the Tax ID (EIN) Number in the same way it the submission took place. If you sent it in via mail, it will return to you in mail form. The same goes for the fax application.
The amount of time it takes to get the Tax ID (EIN) Number for the trust will depend on how you did the application. If you did the application online, you can get the Tax ID (EIN) Number back in a matter of minutes. If you apply via fax, expect it to take up to a week for a fax to come back with the identifier. The mail form will take the longest, usually a couple of weeks at least, before you have the number in-hand.
It is always safe for any trust to get a Tax ID (EIN) Number. It is a best practice for almost all types of trusts and is an absolute requirement for irrevocable trusts. Do your due diligence early to be in full compliance with the IRS.