Your Employee Identification Number (EIN) is one of the most important numbers you’ll need to run your business. Understanding what an EIN verification letter is, why it’s important, how to get it, and when you’ll need copies can help you stay ahead of your workload while avoiding compliance issues.
Here’s what business owners should know and how Mosey can help you with business compliance.
What Is an Employee Identification Number (EIN)?
An Employer Identification Number (EIN) is a unique nine-digit code assigned by the Internal Revenue Service (IRS) to businesses and organizations in the United States or U.S. territories. Think of it as a social security number (SSN) or individual taxpayer identification number (ITIN) but for your business.
This ID number is used to identify your company for tax purposes. Other business activities that require an EIN include:
Tax Reporting: An EIN is necessary for filing federal and state taxes.
Hiring Employees: You need an EIN to hire employees and withhold taxes from their paychecks.
Opening a Bank Account: Banks often require an EIN to open a business account.
Applying for Permits: Many permits and licenses also require an EIN.
Each EIN is unique to a specific business entity and remains with the business throughout its existence, even if ownership or management changes. It helps the IRS track business tax obligations and ensure proper reporting. Even small businesses should obtain an EIN.
To do so, submit an EIN application as soon as you’re ready to formally register your new business. The online application is fast and easy and is required to obtain an EIN verification letter.
What Is an EIN Verification Letter?
An EIN verification letter acts as official proof from the IRS that your business has been assigned an EIN. This letter confirms the legal status of your business entity and serves as proof that you’re acting as an employer.
But as we discussed, you’ll need your EIN for more than just hiring employees. In addition to the business activities we listed before, purchasing certain supplies from wholesale vendors can require an EIN.
Why Do You Need an EIN Verification Letter?
You may encounter a few situations where you’ll need to verify your EIN. You won’t always need a verification letter, but you will always need to have your EIN handy for countless administrative tasks.
Verification of Your EIN
The primary purpose of an EIN verification letter is precisely what you think it is: to verify your EIN. It ensures that the EIN provided to external parties, such as banks or government agencies, is correct and matches IRS records.
Verification letters help to avoid complicated situations that could be caused by clerical errors and to prevent fraud by people who claim to be business owners for unethical purposes.
Compliance Requirements
Many financial institutions require an EIN verification letter as part of their due diligence when conducting business with a company. It proves your business’s legitimacy and compliance with federal tax regulations. Verification is especially important when a financial institution gives you a loan, federally allocated relief funds, or a grant.
Payroll Compliance
Payroll companies, especially those operating in multiple states, may require an EIN verification letter before processing payroll. Some states require verification letters to be filed with state or local tax authorities to verify your employer status when registering for payroll accounts. That’s especially true when a business may be subject to state, county, or municipal taxes.
How To Get an EIN Verification Letter
Obtaining an EIN verification letter can be done completely through the IRS website. It only takes a few minutes.
Here’s how you can obtain yours:
Go to the IRS Website
Visit the official website at www.irs.gov.
Navigate to the “Tools” section and select “Online Services” to find the EIN Assistant tool. This is where you’ll go whenever you need assistance with your EIN. You may have used this tool when you first requested your EIN from the IRS.
Use the EIN Assistant Tool
Click on “Verify Your EIN” through the EIN Assistant tool. Enter the required information about your business, including the business name, EIN, and official business address.
If you don’t know your EIN, you can’t move forward. It’s an entirely separate process to retrieve a lost EIN. Make sure your EIN documents are in a secure place that you can easily access to prevent delays in obtaining IRS documents or completing tax forms.
Request Your EIN Verification Letter
Follow the prompts to request an EIN verification letter. The IRS will generate the letter confirming your EIN’s validity and send it to the business address on file. You should receive the letter in a few days.
If you prefer to use something other than the EIN online tool, you can request an EIN verification letter by contacting the IRS Business & Specialty Tax Line at 1-800-829-4933. You must answer all the same questions. Note that wait times for calls to the IRS are notoriously long, especially during tax season. Calling may take hours rather than minutes.
Keep Your Letter Safe
Once received, keep the EIN verification letter in a secure location with your other important business documents. Consider scanning and securely storing a digital copy of the letter if you’ll need to use it multiple times in a short period.
What To Do if You Can’t Find Your EIN
You’ll need to use your EIN a lot. If you can’t find your EIN and don’t have it memorized, you’ll need a solution as soon as possible.
Retrieving your EIN can be easy if you can access other official IRS paperwork, payroll paperwork, or business registration. If you don’t, you may have to contact the IRS.
Check Previous Filings
Start by reviewing any previous tax returns, documents, or correspondence from the IRS where your EIN might be referenced. It may be on your business license.
Your accountant or payroll company may list your EIN on the paperwork they use when working for your business. Send them an email or give them a call to see if they can help.
Contact the IRS
If you cannot locate your EIN through your records, contact the IRS Business & Specialty Tax Line at 1-800-829-4933. Provide them with your business information, including the legal name, address, and any other details they may request to verify your identity.
This process can take a long time and cannot be completed online. As part of the IRS’s fraud prevention process, you have to speak with an actual agent.
Request a Replacement Document
The IRS can provide you with an EIN confirmation letter when they verify the identity of your business. Keep this copy of your EIN letter safe. If you lose it, you’ll need to jump through the same hoops again.
Which States Need Copies of Your EIN Verification Letter for Payroll?
Some business owners may never need to use a copy of their EIN verification letter, and some states may request copies for payroll and tax purposes. This letter is also referred to as a CP-575, although its function remains the same: to confirm receipt of an EIN, which you must provide for tax and payroll in certain states.
It’s essential to be aware of state regulations that may apply to your business:
Philadelphia Local Wage Tax
Employers in Philadelphia, Pennsylvania, must register within 30 days of hiring employees who are residents or perform services in the city. A copy of your EIN verification letter is necessary for this process as part of registering for the local wage tax, which requires reporting of employee compensation.
Massachusetts Unemployment Tax (for LLCs)
Massachusetts requires businesses, including LLCs, to register for unemployment tax with the Division of Unemployment Assistance (DUA). During registration, you must provide your EIN, and having a copy of the verification letter ensures the information you submit is accurate and aligned with IRS records.
Maine Withholding Tax
Maine businesses must register for withholding tax when they hire employees. As part of the payroll registration process, a copy of the EIN verification letter is needed to validate your federal tax identification.
Mississippi Withholding Tax
Similarly, in Mississippi, businesses registering for withholding tax must provide their EIN as part of the process. A copy of the verification letter from the IRS helps ensure that payroll taxes are correctly administered.
In addition to these cities and states, there may be other jurisdictions in which an EIN verification letter is required for payroll. That’s why tools like Mosey are essential for keeping your business up to date.
Stay Compliant With Mosey
Only some states require an EIN verification letter for payroll and tax compliance. Keeping track of these requirements can be difficult, especially if your business operates in multiple states. Let Mosey’s business management platform do the hard work for you.
Our compliance automation dashboard lets you easily track state and local business compliance issues. We’ll walk you through meeting requirements in the simplest way possible. Schedule a demo with Mosey to learn how we can elevate your business operations.
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