You must have heard that an EIN (employer identification number) is only required when running businesses in the US. However, this is a misconception. There are numerous instances when you need to obtain this identification number, even if you don’t form a business there. This could be for managing a trust, freelancing, or just opening a bank account.
Now, let us explore the potential benefits and ways to get EIN individually without forming a US company.
What Is an EIN?
If you don’t know, you must learn now that an Employer Identification Number (EIN) is a unique 9-digit identifier mostly for tax purposes; like a social security number for the business. The IRS issues this number to businesses in the US to identify the tax accounts so that they can keep track of your taxes.
Why Individuals Might Need an EIN?
You may think now you need to form a legal business structure in the US to apply for the EIN—as the IRS issues this number to identify tax accounts. But here’s the catch! Trust it or not, you don’t have to run a company for this, as there are specific situations where having an EIN makes sense:
- Opening a Bank Account: Are you a non-resident in the US and planning to open a bank account? Non-residents individually need to obtain an EIN, often required by many banks to open a bank account. This shows that you are serious about dealing with US banking regulations.
- Freelancing or Contracting: Are you a freelancer or an independent contractor who works with US clients? Then you must obtain an employer identification number for tax reporting or issuing 1099 forms that are required by some clients. Having an EIN can add a layer of professionalism while protecting individuals’ personal SSNs (social security numbers).
Suppose you are a US resident and freelancing at Upwork, you will need an EIN; as Upwork may ask for one. This is because freelancers are likely considered independent contractors. So you need to provide an EIN for reporting the income to the IRS on Form 1099-K. - Managing a Trust or Estate: An EIN is necessary for tax filings with the IRS if you are in charge of a pension plan (Keogh plan), trust, or estate. It helps distinguish the trust or estate’s finances from your personal ones.
- Hiring Employees: You need to get EIN individually to handle payroll and withhold employment taxes. Even if you are just starting out as an individual or sole proprietor, you will still need an employer identification number whether you are planning to hire employees.
- Filing U.S. Taxes as a Non-Resident: When filing Form 1040NR and adhering to other U.S. tax rules, non-resident individuals who earn income from U.S. sources could need an EIN. This identification number allows you to fulfill these obligations without forming a company.
- Applying for Business Licenses: In some cases, even individuals may need an EIN to apply for certain business (alcohol, tobacco) licenses or permits (e.g. Resale certificate).
- Operating Sole Proprietors: A sole proprietor individual may own an EIN to file pension or excise tax returns.
Eligibility to Get EIN Individually Without Forming US Company
The good news is that EIN applications are open to almost everyone. Anyone can receive one, regardless of residency status or citizenship in the United States. A formal business structure is unnecessary. If you are a freelancer dealing with clients in the United States, a sole proprietor, and would prefer to maintain a professional demeanor or simply avoid disclosing your Social Security Number (SSN) for business purposes, this is especially beneficial for you.
How to Own an EIN Individually without a Company?
Owning an EIN individually is a pretty straightforward process. Here’s how you can obtain your own:
1. Gather Your Information
In order to initiate the application process, it is necessary to collect certain fundamental information, including your name, address, contact information, Social Security Number (SSN), or Individual Taxpayer Identification Number (ITIN).
2. Fill out the Form SS-4
Once you gather the information, you must complete the SS-4 form provided by the IRS by filling out personal information and reasons that indicate why you are applying for an EIN. Such as whether you need to own an EIN for banking purposes or tax purposes. Also, you must mark the appropriate category on the form, such as “sole proprietor,” if you are applying as an individual.
3. Application Process
Online Application: Individuals can apply online through the IRS website if they have a valid taxpayer identification number (such as an SSN or ITIN).
Mail or Fax: Applicants who are not able to access the online system or are applying from outside the United States may submit Form SS-4 to the IRS via mail or fax.
Phone (International Applicants): Non-US resident individuals need to call the IRS at the provided number to receive their EIN immediately after the application is completed.
4. Submit and Wait
Once you’ve submitted your application, the wait depends on how you applied. Online is instant, fax takes a few days, and mail can take a few weeks.
Note: If you are in a hurry, Get EIN Express Delivery Within 2 Days through Business Globalizer.
Common Mistakes to Avoid When Applying for an EIN Individually
When applying for EIN on your own, you must avoid the following mistakes:
- Incorrect Information: Ensure all details on Form SS-4 are accurate to avoid delays.
- Choosing the Wrong Entity Type: Select the appropriate entity type, such as “sole proprietor,” if applicable.
- Applying for Multiple EINs: The IRS limits EIN issuance to one responsible party per day. Make sure you only apply once if you’re using your EIN for multiple purposes.
Consideration for the Key Sections of Form SS-4 When Applying for an EIN Individually
When applying for an EIN individually using Form SS-4, it’s important to know that certain sections need extra attention to ensure a smooth process. Each part of the form plays a role in how the IRS identifies your business for tax purposes. So, let’s break it down in a way that helps you breeze through the form while avoiding any mistakes:
- Line 1 (Name of Individual): Enter your full name as the individual applying for the EIN.
- Line 7a and 7b (Responsible Party): As an individual applying for an EIN, you will be the responsible party. Enter your name and taxpayer identification number (e.g., SSN, ITIN).
- Line 8a (Type of Entity): Select “Sole Proprietor” if you’re operating individually without forming a formal business entity. If managing a trust, estate, or another entity, select the appropriate option.
- Line 9a (Reason for Applying): Choose the reason for applying, such as “Started a new business” or “Hired employees.”
- Line 10 (Date Business Started): Provide the date you began operating or when you need the EIN for the activity.
- Signature: You must sign and date the form, affirming that the information is correct.
FAQs
Q1: Is it necessary to get the individual EIN for freelancers working with US clients?
Answer: Having an EIN is highly beneficial, while not always mandatory for freelancers. Some U.S.-based companies or platforms, like Fiverr and Upwork, may require you to provide an EIN for tax reporting purposes, especially in the case of 1099 forms.
Q2: I am a US resident, do I need an EIN if I don’t have employees?
Answer: Not necessarily, but it can still be useful if you’re a freelancer, independent contractor, or sole proprietor. This protects your SSN when dealing with clients, tax reporting, or opening a bank account.
Bottom Line
As we have seen, whether you run a business in the US or just an individual freelancer or a sole proprietor, obtaining an EIN is possible. This is just a simple process that can open many doors of opportunity.
But here’s a problem sometimes we hear! If you are applying for EIN for the very first time, it can be overwhelming while the process is straightforward. You may not put an accurate date in an accurate place, which wastes your time. That’s where the IRS-certified acceptance agent (CAA) Business Globalizer comes in. Our experts will help you to get EIN individually without forming a US company. From filing out the IRS to dealing with complicated tax terms, we can handle the entire process for you.
So, why do you go through the headache of doing it yourself? Feel free to contact us.
