What is the purpose of an Employer Identification Number (EIN)?

The purpose of an Employer Identification Number (EIN) is specifically to identify businesses for tax purposes. It serves as a unique identifier assigned by the Internal Revenue Service (IRS) to various types of businesses, including sole proprietorships, partnerships, corporations, and non-profits. The EIN is crucial for filing business tax returns, paying federal taxes, and reporting employee wages.

In addition to its primary role in tax identification, the EIN also facilitates other functions such as opening business bank accounts and applying for business licenses, but these functions stem from its foundational purpose of identifying the business for tax administration. Thus, while it is associated with other administrative aspects of running a business, its primary role is to ensure compliance with tax obligations at the federal and state levels.