When to Get an EIN After Someone Dies
When a loved one passes away, managing their estate involves several critical tasks, including obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is necessary for handling various financial and legal responsibilities associated with the estate. This article will guide you on when to get an EIN after someone dies and why it is essential for effective estate administration.
What is an EIN?
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS for tax identification purposes. While it is commonly associated with businesses, an EIN is also required for estates to manage their financial activities.
Why an EIN is Necessary for an Estate
Opening an Estate Bank Account: An EIN is required to open a bank account in the name of the estate. This account is used to manage the deceased’s financial affairs, such as paying debts, expenses, and distributing assets to beneficiaries.
Filing Tax Returns: Estates are required to file their own tax returns if they generate income. An EIN is necessary for filing Form 1041, U.S. Income Tax Return for Estates and Trusts.
Handling Investments: If the deceased had investments, any income generated after their death becomes the estate’s income. An EIN is needed to manage these assets and report the income.
Operating a Business: If the estate continues to operate a business after the owner’s death, a new EIN is required to report business income and pay associated taxes.
When to Get an EIN
Immediately After Death: It is advisable to obtain an EIN as soon as possible after the death of the individual. This ensures that you can promptly handle financial matters and avoid delays in estate administration.
Before Opening an Estate Bank Account: You will need an EIN to open an estate bank account. This account is essential for consolidating the deceased’s assets, paying outstanding debts, and managing ongoing expenses.
Prior to Filing Tax Returns: If the estate generates more than $600 in annual income, you are required to file Form 1041. Obtaining an EIN early allows you to meet tax filing deadlines and ensure compliance with IRS requirements.
When Managing Investments: If the estate includes investments that generate income, such as interest, dividends, or rental income, an EIN is necessary for reporting this income accurately.
If Operating a Business: Should the estate continue to operate a business, you will need a new EIN to handle all business-related financial activities, including filing tax returns and paying any taxes due.
How to Obtain an EIN
Determine Eligibility: The individual applying for the EIN must be the estate’s executor, administrator, or personal representative. This person is responsible for managing the estate’s financial and legal matters.
Gather Required Information: Before applying, collect the following information:
Legal name of the deceased
Social Security Number (SSN) of the deceased
Date of death
Address of the estate
Name, SSN, and contact information of the estate’s executor, administrator, or personal representative
Complete the Application: There are three primary ways to apply for an EIN:
Online: Visit the IRS website and complete the online application. The EIN is issued immediately upon completion.
Mail: Download and complete IRS Form SS-4, Application for Employer Identification Number. Mail the completed form to the IRS. Processing typically takes four to six weeks.
Fax: Download and complete Form SS-4. Fax the form to the IRS. Processing usually takes four business days.
Receive the EIN: Once your application is processed, you will receive the EIN. If applying online, the EIN is issued immediately. For mail and fax applications, the EIN will be sent by mail.
Conclusion
Obtaining an EIN after someone dies is a crucial step in managing their estate effectively. It allows you to open an estate bank account, file necessary tax returns, handle investments, and operate any ongoing businesses. By obtaining an EIN promptly, you ensure that the estate’s financial affairs are managed efficiently and in compliance with IRS regulations. This helps facilitate a smooth and orderly administration of the estate, providing peace of mind during a challenging time.
