Common Mistakes to Avoid When Applying for an Employer Identification Number
Are you about to start your own business or planning to expand it? If yes, you’re in luck because this blog is for you.
The first thing that you will need to hire more people is to have an EIN or an Employer Identification Number. It’s a nine-digit number that is issued by the Internal Revenue Service and it’s crucial for doing day-to-day work such as filing taxes, opening a business bank account, or simply hiring more employees.
However, while it’s relatively easier to file for an EIN, it can be a bit tricky as there are some mistakes people make. Read on to find out what the common mistakes are so that you can avoid them in the future.
Not Providing Accurate Information
One of the most common mistakes is inaccuracy. Yes, you read that right. Incorrect email addresses, wrong numbers misspelled names, addresses and even inputting the wrong social security number can be a problem for you. These small mistakes tend to increase the processing time of your application and in some cases, can even lead to a rejection—forcing you to start from scratch.
The key here is to double-check everything. If you’re unsure, look it up or ask a professional. It might seem like you’re wasting time, but being slow and cautious will help you get ahead in the long run.
Make Sure You Have all the Information
Another common mistake that people make when filing for an EIN is that they rush into these things without gathering their documents. Right before you plan to fill out the form, make sure you have the Social Security Number (aka the SSN), the legal name of your business on hand, as well as the ITIN (Individual Taxpayer Identification Number). Furthermore, you should also have the date when your business was established or when you took it over.
Do Not Use Symbols
When you’re applying for an EIN, be sure to avoid using symbols as the Internal Revenue Service doesn’t accept that. You can use a hyphen, numeric characters, alphabets, and ampersand to fill your application.
If you use any other symbols such as a comma or an apostrophe, you will face trouble as the IRS doesn’t accept this. Therefore, even if your business name has an apostrophe or the like in it, substitute it with a hyphen or delete the apostrophe altogether.
Apply on Time
It’s never a good idea to apply too early for an EIN or too late. In fact, be sure to apply for an EIN on time, i.e., right when you need it. If you apply for it too early, especially when you don’t need it, the IRS might reject the application because your business isn’t ready. Moreover, your business model might not justify it or you might not have the documentation at that time to prove it.
On the flip side, if you apply too late, that can also be a problem. Leaving it for the last minute will mean that you’re rushing through the application, overlooking important details, misspelling names, or missing deadlines altogether. This can result in penalties and fines, which will be very costly for the entire business.Apply with US!
Not Keeping Proper Records
Another common mistake that people commit when filing for an EIN is that they forget to keep proper documentation—a mistake that can result in a huge penalty. You must track your financials such as payroll, income, and expenses. You would also need to keep on hand your bank statements, agreements, contracts, or invoices to avoid any further questions by the IRS.
Additionally, keep records of the ownership of your business structure and tax obligations to ensure that the whole process is very smooth and that you’re not fined or grilled for further questions.
Not Updating the EIN When Needed
Just as you didn’t need an EIN at one point, you might not need it in the future either, and having one at that time can put you on the radar for the IRS. Not canceling the EIN when business owners don’t need it is another common mistake. Businesses go through changes all the time—from a one-man operation to getting a partner on board to having a public limited company to going back to a sole proprietorship.
When you fail to update the EIN, you can possibly file taxes under the wrong number and face a lot of problems. Another mistake that you can make is to not update the records when your phone number changes or the location of your business changes. Relevant people might not be able to reach out to you and you might just miss out on important deadlines like this.
Writing an Address That’s More than 35 Characters Per Line
When you’re applying for the EIN, make sure to have an address that has only 35 characters per line. That’s the only address the IRS accepts. If you have more than 35 characters in a single line, be sure to keep essential street address information such as your apartment number or floor number to stick to the guidelines. Remember that the address you are writing will be cross-checked against the United States Postal Service database so you don’t want any trouble.
There you have it! The above are some of the most common mistakes that business owners tend to make when they’re filing for an EIN. And as you can see, even small errors can get you in hot waters. Therefore, be sure to check and cross-check everything in your application before you finally send it into the IRS. Take your time and don’t rush things through. If you want, you can always ask for help from the professionals who have been trained to file the cases so that you can have a smoother experience without having to worry about fines or something going wrong.For more information please visit IRS website.