You’re ready to hire your first employee.
But you don’t have an EIN yet. You think you can hire without it. You’re wrong.
You can’t hire employees without an EIN.
The IRS requires it. Payroll systems need it. Tax compliance depends on it. You’ll face penalties without it.
This guide explains why.
What an EIN is for hiring. Payroll requirements. Tax withholding rules. Compliance obligations. What happens if you don’t have one.
Read this. Understand the requirements. Get your EIN. Hire legally.
Key Takeaways
- An EIN is required by law before you can hire employees—the IRS uses it to track payroll taxes, withholding, and employment tax compliance
- Payroll systems and HR platforms require an EIN to set up employee records, process payroll, and file tax forms correctly
- Without an EIN, you cannot properly withhold federal and state taxes, file employment tax returns, or issue W-2 forms to employees
- Getting an EIN before hiring prevents delays, ensures compliance, and allows you to set up payroll systems in advance
- The EIN application process takes minutes online and is free—there's no reason to delay getting one before you start hiring
Table of Contents
Why EIN Is Required for Hiring
The IRS requires an EIN before you can hire employees.
What it is: An Employer Identification Number (EIN) is a nine-digit number the IRS assigns to your business.
Why it’s required:
- IRS uses it to track employment taxes
- Required for payroll tax reporting
- Needed for employee tax forms (W-2, W-4)
- Required for state employment tax registration
- Needed for unemployment insurance
Legal requirement:
- Federal law requires EIN for employers
- State laws require EIN for state tax registration
- Cannot hire employees legally without it
The bottom line: You cannot hire employees without an EIN. It’s not optional. It’s required by law.
Payroll Requirements
Here’s what you need an EIN for in payroll:
Payroll System Setup
What you need:
- EIN to set up payroll accounts
- EIN to register with payroll providers
- EIN to process payroll transactions
Why it matters: Payroll systems cannot process payroll without an EIN.
Employee Records
What you need:
- EIN to create employee records
- EIN to track employee wages
- EIN to calculate payroll taxes
Why it matters: Employee records require an EIN for tax reporting.
Payroll Processing
What you need:
- EIN to process payroll
- EIN to calculate withholdings
- EIN to generate pay stubs
Why it matters: Payroll processing requires an EIN for tax compliance.
Pro tip: Get your EIN before setting up payroll systems. It speeds up the process and ensures compliance from day one.
Tax Withholding Rules
Here’s how EIN relates to tax withholding:
Federal Tax Withholding
What you need:
- EIN to register for federal tax withholding
- EIN to remit withheld taxes to IRS
- EIN to file employment tax returns
Requirements:
- Withhold federal income tax from employee wages
- Withhold Social Security and Medicare taxes (FICA)
- Remit taxes to IRS using your EIN
Why it matters: Federal tax withholding requires an EIN for proper reporting.
State Tax Withholding
What you need:
- EIN to register for state tax withholding
- EIN to remit withheld taxes to state
- EIN to file state employment tax returns
Requirements:
- Withhold state income tax (if applicable)
- Withhold state disability insurance (if applicable)
- Remit taxes to state using your EIN
Why it matters: State tax withholding requires an EIN for proper reporting.
Tax Forms
What you need:
- EIN to issue W-2 forms to employees
- EIN to file W-3 forms with IRS
- EIN to file quarterly employment tax returns (Form 941)
Why it matters: All employment tax forms require your EIN.
Pro tip: Without an EIN, you cannot properly withhold or remit taxes. This results in penalties and compliance issues.
Compliance Obligations
Here’s what you must comply with using your EIN:
Federal Compliance
What you must do:
- Register with IRS using EIN
- File quarterly employment tax returns (Form 941)
- File annual unemployment tax returns (Form 940)
- Issue W-2 forms to employees
- File W-3 forms with IRS
Penalties for non-compliance:
- Late filing penalties
- Late payment penalties
- Interest on unpaid taxes
- Potential criminal penalties for willful violations
State Compliance
What you must do:
- Register with state using EIN
- File state employment tax returns
- Pay state unemployment insurance
- Comply with state wage and hour laws
Penalties for non-compliance:
- State penalties vary by state
- Loss of business license
- Legal action
Record Keeping
What you must do:
- Maintain employee records with EIN
- Keep payroll records
- Keep tax records
- Retain records for required periods
Why it matters: Proper record keeping requires an EIN for organization and compliance.
Pro tip: Compliance obligations start the day you hire your first employee. Having your EIN ready ensures you can comply from day one.
What Happens Without an EIN
Here’s what happens if you try to hire without an EIN:
You Cannot Legally Hire
The problem:
- Federal law requires EIN for employers
- Cannot process payroll without EIN
- Cannot register for employment taxes without EIN
- Cannot issue proper tax forms without EIN
The result: You cannot legally hire employees without an EIN.
Payroll System Issues
The problem:
- Payroll systems require EIN to set up
- Cannot process payroll without EIN
- Cannot generate pay stubs without EIN
- Cannot file tax forms without EIN
The result: Payroll systems won’t work without an EIN.
Tax Compliance Problems
The problem:
- Cannot withhold taxes properly without EIN
- Cannot remit taxes to IRS without EIN
- Cannot file employment tax returns without EIN
- Cannot issue W-2 forms without EIN
The result: Tax compliance is impossible without an EIN.
Penalties and Fines
The problem:
- IRS penalties for non-compliance
- State penalties for non-compliance
- Interest on unpaid taxes
- Potential legal action
The result: Penalties and fines for trying to operate without an EIN.
Pro tip: Get your EIN before you need it. The application takes minutes and is free. There’s no reason to delay.
Getting Your EIN
Here’s how to get your EIN quickly:
Online Application
Where to apply: IRS website at irs.gov
How it works:
- Complete online application
- Answer all questions accurately
- Submit application
- Receive EIN immediately
Time required: 5-15 minutes
Cost: Free
Result: You get your EIN number immediately after submission.
Required Information
What you need:
- Business name (exactly as filed with state)
- Business address
- Your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Business formation date
- Entity type (LLC, Corporation, Partnership, etc.)
- Reason for applying (hiring employees)
Why it matters: Having this information ready speeds up the application.
After You Get Your EIN
What to do:
- Save your EIN confirmation letter
- Register with state employment agencies
- Set up payroll systems
- Register for employment taxes
Why it matters: Getting your EIN is just the first step. You need to register with state and federal agencies.
Pro tip: Apply for your EIN as soon as you know you’ll be hiring. Don’t wait until you’re ready to hire. Get it in advance.
Your Next Steps
Get your EIN. Prepare for hiring. Stay compliant.
This Week:
- Get your EIN online (5-15 minutes)
- Save your EIN confirmation letter
- Research state employment requirements
- Understand payroll obligations
This Month:
- Register with state employment agencies
- Set up payroll system
- Register for employment taxes
- Prepare employee onboarding process
Going Forward:
- Withhold taxes properly
- File employment tax returns on time
- Issue W-2 forms to employees
- Maintain compliance records
Need help? Check out our EIN application guide for getting your EIN, our state-by-state checklist for state requirements, and our registered agent guide for business address requirements.
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FAQs - Frequently Asked Questions About Hiring Your First Employee: Why Your EIN Matters More Than You Think
Why can't I hire my first employee without an EIN?
Federal law requires an Employer Identification Number before you can hire employees. Without it, you cannot process payroll, withhold taxes, or file required tax forms.
Learn More...
The IRS uses your EIN to track employment taxes, payroll tax reporting, and employee tax forms like W-2s and W-4s.
Payroll systems and HR platforms require an EIN to set up employee records, process payroll, and file tax forms correctly.
State laws also require an EIN for state employment tax registration and unemployment insurance enrollment.
There is no workaround. You cannot legally hire employees without an EIN, period.
What specific payroll functions require an EIN to operate?
Setting up payroll accounts, creating employee records, processing payroll transactions, calculating withholdings, and generating pay stubs all require your EIN.
Learn More...
Payroll providers like Gusto, ADP, and QuickBooks require your EIN during setup before they can process any payroll.
Employee records need your EIN to track wages, calculate payroll taxes, and link to federal and state reporting systems.
Every pay period, your EIN is used to calculate federal income tax withholding, FICA taxes, and state taxes.
Pay stubs, W-2 forms, and all employment tax filings reference your EIN as the employer identifier.
What tax withholding obligations does an EIN enable me to fulfill?
Your EIN lets you withhold federal income tax, Social Security, Medicare (FICA), and state income taxes from employee wages, then remit them to the IRS and state.
Learn More...
Federal tax withholding requires registering with the IRS using your EIN to remit withheld income taxes, Social Security, and Medicare taxes.
State tax withholding requires using your EIN to register with state agencies and remit withheld state income tax and disability insurance.
You must file quarterly employment tax returns (Form 941) and annual unemployment tax returns (Form 940) using your EIN.
At year end, your EIN is required to issue W-2 forms to employees and file W-3 forms with the IRS.
What penalties can I face if I try to hire without an EIN or fail to comply with employment tax rules?
You face IRS late filing penalties, late payment penalties, interest on unpaid taxes, potential criminal penalties for willful violations, and possible loss of your business license.
Learn More...
The IRS imposes penalties for late filing of employment tax returns and late payment of withheld taxes.
Interest accrues on unpaid employment taxes from the due date until paid in full.
Willful failure to withhold and remit employment taxes can result in criminal penalties including fines and imprisonment.
States impose additional penalties that vary by jurisdiction, including potential legal action and loss of business license.
How do I get an EIN and how long does the process take?
Apply free on the IRS website at irs.gov. The online application takes 5-15 minutes and you receive your EIN number immediately.
Learn More...
Complete the online application on the IRS website with your business name (exactly as filed with your state), business address, and your SSN or ITIN.
You will need to provide your entity type (LLC, Corporation, Partnership), formation date, and reason for applying.
After submitting, you receive your EIN immediately. Save the confirmation letter as your official record.
After getting your EIN, register with state employment agencies, set up payroll systems, and register for employment taxes before hiring.
What should I do immediately after receiving my EIN to prepare for hiring?
Save your EIN confirmation letter, register with state employment agencies, set up a payroll system, and register for federal and state employment taxes.
Learn More...
Store your EIN confirmation letter securely. You will need this number for every employment-related form and registration.
Register with your state's employment agency for state tax withholding and unemployment insurance using your new EIN.
Choose and set up a payroll system (like Gusto, ADP, or QuickBooks Payroll) which requires your EIN during setup.
Prepare your employee onboarding process including W-4 forms, I-9 verification, and any state-specific new hire reporting requirements.
Sources & Additional Information
This guide explains general EIN and employment requirements. Specific requirements vary by state and business type.
For EIN application, visit the IRS website.
For information about getting your EIN quickly, see our EIN Application Guide.
For state-specific requirements, see our State-by-State Checklist.
