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How to Get an EIN Number in Iowa

One of your legal obligations as a small business in Iowa is to get an EIN. While the process of applying for an EIN is simple, many people still feel overwhelmed when it comes to understanding exactly what it is. We’ve compiled this guide to help you understand what the EIN is, why you need one, and how to get one in Iowa.

What Is an EIN Number?

An EIN is an Employer Identification Number, which is a type of taxpayer identification number (TIN). It’s a unique, nine-digit number that identifies your business on a state and federal level and helps with the employer’s quarterly federal tax. It’s very similar to your social security number (SSN), except it’s for a business entity instead of an individual.

Many people tend to use EIN, FEIN (Federal Employer Identification Number), or taxpayer identification number (TIN) to refer to the same number. These terms may be slightly different, but they generally refer to any number that identifies a business entity for tax purposes.

The most important use of an EIN is that it serves as certification for a request for taxpayer identification for your business. This can open up many doors for additional financial benefits for your business.

The Benefits of an EIN Number

An employer identification number (EIN) offers many benefits for business owners. It allows you to:

  • Separate business and personal finances
  • Preserve your limited liability since your business is a separate entity
  • Open a bank account and obtain financing for your business
  • Hire employees and have them follow instructions for Form 1040

Iowa Small businesses are often prone to identity theft, especially if you have to use your SSN. Separating your business from your own personal identity is essential to protecting your privacy and finances. Having an EIN also helps reduce the risk of identity theft because you can use your EIN instead of your social security number when dealing with suppliers or lenders.

Why Do I Need an Iowa EIN (Tax ID) Number?

The Internal Revenue Service (IRS) uses your EIN to identify your business for tax purposes. However, only certain businesses need to get an EIN. If you’re a sole proprietor or a single-individual Limited Liability Company that doesn’t have any employees, you can use your SSN or Individual Taxpayer Identification Number (ITIN) instead.

However, if your business meets any of the following criteria, you’ll need to apply for an employer identification number (EIN) in Iowa:

  • The Iowa business has employees
  • The business is a corporation or partnership instead of a sole proprietorship or LLC
  • The business files tax returns on certain items, including firearms, alcohol, tobacco, as well as employment or excise
  • The business has a Keogh plan or any other employee benefit plan
  • The business interacts with trusts, estates, non-profit organizations, farmer co-ops, or real estate mortgage conduits

It’s important to note that the responsible party – the person who owns or controls the entity – must be an individual person, not an entity, unless the applicant is a government entity.

Other entities that need to apply for an EIN include:

  • Trusts and other fiduciaries
  • Estates of deceased individuals
  • Tax-exempt organizations
  • Personal service corporations

The primary reason a business gets an assigned EIN is to file the employer’s quarterly federal tax return. Employees are responsible for their own taxes and should use instructions for Form 1040 instead. However, you’ll quickly find that having an assigned EIN can help with many other business activities as well.

If you don’t have employees or meet any of the criteria for needing an EIN, that doesn’t mean that you can’t get one. Sole-proprietors and LLCs can still apply for one and reap the benefits of having your business be its own entity.

Essentially, having an employer identification number separates the business into its own entity, distinct from you. By keeping your finances separate, you reduce the personal risks of running a business and simplify accounting and taxes. In fact, many banks require an EIN as a requirement to open a business banking account, which often gives favorable terms compared to private banking accounts. You’ll also use your EIN to:

  • Apply for a business loan
  • Identify your business on license and permit applications (state EIN)
  • Pay federal payroll taxes and FICA taxes (federal EIN)

If you have employees, they will file their tax returns with instructions for Form 1040 instead of paying the employer’s quarterly federal tax.

If you’re a sole proprietor or run an Iowa LLC without employees, there are still some good reasons to get an EIN. In addition to protecting your identity from fraud, having an employer identification number (EIN) can make your company seem more professional and reputable. It’s beneficial for sole-proprietors or taxpayers who are still establishing their business and can help land those vital initial clients.

How Do I Apply for an EIN in Iowa

The Internal Revenue Service has made it relatively easy to get an Iowa EIN. There are several channels that you can use, including fax or mail, and online applications, so you can choose the one that’s easiest for you.

The most convenient method to get your assigned EIN is the online application. However, if you’re concerned about online security, you may prefer using the mail or fax option instead.

Information Needed for an EIN Application

No matter what channel – mail, fax, or online – you use, the Internal Revenue Service requires the same information. It’s a good idea to gather this information before applying since it simplifies the process and makes it feel less overwhelming. Once you have all the requisite information, the rest of the application is quick and relatively easy.

The information the applicant has to provide includes:

  • The legal name of your business as well as the trade name, if different
  • The authorized person who acts for the business, such as the partner, executor, trustee, or corporate officer
  • The business mailing address
  • The mailing address for the person requesting the EIN
  • The social security number/tax ID number/existing EIN of the principal officer, owner, or general partner that is responsible for managing the business and its assets and funds
  • The type of entity
  • The number of LLC members if the business is an LLC
  • The state or country of incorporation if the business is a corporation
  • The reason for applying for the employer identification number (EIN). You must only give one reason, even if you have many for wanting the EIN. Common reasons include wanting to hire employees, purchasing an existing business, changing the business entity type, and banking purposes.
  • The closing month of the fiscal year. This date will depend on your accounting strategy. Most businesses use the calendar year, but others use different fiscal years to minimize their quarterly federal tax return. If you’re not sure, consult with your tax professional
  • An estimate of the maximum number of employees you expect to have within the next year (can be zero)
  • The first date you paid your employees if you have any
  • The main business activity. You may be asked for more detail if you sell a specific product or provide a specific service.
  • The applicant’s name, telephone number, and signature, or a third party’s information if they act on your behalf.
  • If you’re applying for an EIN on someone else’s behalf, you need to get signed authorization from the taxpayer (the person who needs the EIN) by filling in Form SS-4 from the IRS

You may be tempted to complete an EIN application with some of the information missing. However, if you do that on your fax or mail applications, it can delay the issuing of your EIN. In some cases, it can even lead to an EIN denial, which means you’ll have to go through the entire process again. If you leave any information out from the online form, it will automatically restart.

If you’re unsure about specific terms, such as ‘responsible party,’ ‘entity,’ or any others, consult with your tax professional for assistance, or visit the official website of the IRS for information on related topics.

What Is a Responsible Party?

As you can see from the information required, an EIN application requires that someone becomes the responsible party of the entity. This is the person who controls and manages the business, its assets, and funds. The responsible person must be an individual person, not an entity or business unless the applicant is a government entity. If your business has several people who fulfill this role, simply nominate someone to act as the responsible party for the EIN.

The applicant and responsible person don’t have to be the same individual, as long as the applicant can show they’ve been authorized to request an EIN.

Apply for an EIN By Fax

Applicants need to obtain IRS Form SS4 and complete it with the required information. They can then fax the form to Iowa {fax number}. You need to provide your own fax number so that the Internal Revenue Service can send you a fax with your assigned EIN within four days.

Apply for an EIN By Mail

The process for applying by mail is similar to that by fax. First, you need to get IRS Form SS-4 and fill it in. Once you’ve mailed the form to your state’s Internal Revenue Service department, you can expect your assigned EIN within four weeks in the mail.

Apply for an EIN Online

The simplest and fastest way to get your employer identification number (EIN) is to use the online application process. This form is accessible through the IRS official website and is accessible to every entity that is located within the United States or U.S. Territories. The only restriction is that you can only apply Monday through Friday from 7 a.m. to 10 p.m. EST.

You have to complete the entire application in one sitting since the online form doesn’t allow for saving. If the website detects that you’re gone for 15 minutes, it will automatically log you out, and you’ll need to start again. Make sure that you have all the information on hand and enough time to go through the process. Download Form SS-4 beforehand and fill it out, or at least gather the information. That way, you’re prepared, and the process will go smoothly.

Once you submit the completed application, the IRS validates the information, and you’ll get your assigned nine-digit EIN immediately. You will get the official confirmation document later, but you can use your assigned EIN immediately.

Any responsible party can apply for an EIN as long as the principal business of the entity is within the United States or the U.S. Territories. However, for corporations incorporated outside of the U.S. or U.S. Territories, you’ll have to call the IRS at (267) 941-1099 during working hours, Eastern Time.

Reasons for EIN Denial

In very rare instances, the IRS may deny your application. They will clearly give the reason, allowing you an opportunity to remedy the situation. However, if you want to make sure you get your employer identification number (EIN) the first time, here are some of the common reasons for EIN denial:

  • Another business has the same name in the same state
  • Incomplete application
  • Too many applications – the IRS will only issue one EIN per responsible party per day
  • The business already has an EIN

If your application succeeds, the IRS will send you Form CP-575, the confirmation letter. This gives you the official nine-digit EIN, so be sure to keep it in a safe place. You will require this confirmation letter when you apply for a business loan or open a business banking account.

How Long Will It Take to Get an EIN in Iowa

The time it takes to receive your assigned EIN will depend on the format of your EIN application and how well you completed the form. In general, you can expect:

  • Online application – immediate EIN
  • Fax application – EIN within four working days
  • Mail application – EIN within four weeks

The IRS also has placed a limit on the number of EINs it will issue to the same responsible party. No matter what application method you use, the responsible party will only receive one EIN issuance per day.

Is an EIN Number the Same as a TAX ID Number?

While people use the terms employer identification number (EIN) and taxpayer identification number (TIN) interchangeably, there is a slight difference between them. You can use any TIN to comply with a request for taxpayer identification, depending on the situation.

Taxpayer identification number (TIN) is the generic term that the IRS uses for any numbers used for tax and identification purposes. This means that while all EINs are TINs, not all tax IDs are EINs. The three main types of tax identification number are:

  • Social security number (SSN)
  • Individual taxpayer ID number (ITIN)
  • Employer identification number (EIN)

The individual taxpayer ID number is assigned to people who can’t receive an SSN or EIN. These include:

  • Non-resident alien filing for a U.S. tax return
  • A U.S. resident alien filing for a U.S. tax return
  • Dependents and spouses of non-resident and U.S.-resident aliens

The ITIN works similarly and can be used as documentation for a request for taxpayer identification.

It’s important to note that the ITIN is only for tax reporting and doesn’t work for identification purposes, unlike an SSN or EIN. To apply for an ITIN, the non-resident alien taxpayers will have to follow a similar process as applying for an EIN. Employers can then use the ITIN for tax purposes by filling in Form W-4.

U.S. residents don’t have to apply for an ITIN since they already have an SSN. The only people who need to apply for an ITIN are people who are restricted from obtaining another taxpayer identification number.

Let a professional file your Iowa EIN number today

Let a professional file your Iowa EIN number today

Getting a New Employer Identification Number (EIN)

Businesses don’t stay the same and will often undergo radical changes in structure as they grow. In some instances, you may need to get a new EIN if the changes are significant.

You’ll need to get a new EIN if:

  • You change your type of business
  • You become a subsidiary of a corporation, or you’ve used the parent company’s EIN previously
  • You’ve formed a new corporation after a merger
  • You’re a sole-proprietor subject to bankruptcy proceedings

Changes that don’t require a new EIN include:

  • Changes to the name or address of the business
  • Ending a partnership business and starting a new one

Notifying the IRS of Changes

While your EIN may not change, you still have a responsibility to keep the IRS up to date with minor changes to your business that don’t affect your EIN. This includes notifying the IRS of changes to your address, which you can do online, via fax, or by mail. If the business closes, you have to notify the IRS so they can close the tax account associated with that particular EIN.

As with social security numbers, each EIN is unique and never reused. When your business closes, your EIN will disappear forever.

What’s the Difference Between Federal and State Tax ID Numbers?

When most people talk about their EIN, they’re referring to their federal tax ID. There is absolutely no difference between a state EIN and the federal employer identification number (FEIN). This is important because federal taxes apply to all businesses, even if they’re exempt from state taxes.

The state EIN is Iowa’s version of the FEIN and serves the same purpose. Essentially, you’ll use your state EIN to pay state taxes and the FEIN to pay federal taxes. In many cases, the process for applying for federal EIN and state EIN is the same. However, you may need to provide slightly different information and send the forms to different addresses if you use fax or mail.

Since the requirements for personal, state corporate tax, and federal corporate tax are different, you need to understand exactly what tax you and your business have to pay. Some taxpayers may be exempt from paying personal tax but still required to pay corporate tax. Failing to file your quarterly federal tax return can result in severe penalties, so it’s a good idea to stay on the right side of the law.

Let a professional file your Iowa EIN number today

Let a professional file your Iowa EIN number today