While You Wait for Your EIN: Setting Up Your Books Early

The state filing is done. The EIN is not here yet. Vendors and software and the first client do not pause for that number.

Bookkeeping while waiting for an EIN is the work you can finish in that gap. You build the records now. You open the bank account when the number arrives.

How long this wait lasts

An EIN is the federal tax ID for the business. The IRS says you need one to operate an LLC or a corporation or a partnership. You need one if you have employees or if you pay certain excise taxes. You can request one for banking or state tax purposes even when federal tax rules do not force it.

The clock depends on how you apply.

The IRS recommends the online application for a business in the United States or a U.S. territory. You complete it in one session. You cannot save a partial application. The session ends after 15 minutes of inactivity and you start over. If the IRS approves it, the number appears at the end. Print or save the confirmation before you close the window.

The online tool has set hours in Eastern time. It runs Monday through Friday from 6 a.m. until 1 a.m. the next day. Saturday runs from 6 a.m. to 9 p.m. Sunday runs from 6 p.m. to midnight. The responsible party needs a Social Security number or an individual taxpayer identification number. You can get one EIN per responsible party per day.

Fax and mail are the paths that create a real wait. The IRS says a fax application comes back in about four business days when you include a return fax number. Mail takes about four weeks. Form SS-4 instructions say to mail the form at least four to five weeks before you need the number. High volume can slow both paths. The IRS posts a processing update about every two weeks.

International applicants cannot use the online tool. The IRS offers a phone line at 267-941-1099 on weekdays, plus fax or mail.

Use one method for the entity. The instructions for Form SS-4 say a second method can produce a second EIN. A business entity should have only one.

Skip any website that charges a fee. The IRS and the SBA both say the application is free.

What has to wait for the number

Some tasks stay blocked until the EIN exists. The list below shows which tasks the IRS and the SBA tie to the number.

The SBA says you need the EIN to open a business bank account and to hire employees and to apply for many licenses. You can open the account once you have the federal EIN. A sole proprietorship is the exception the SBA names. A bank may accept a Social Security number for that structure. An LLC is not that exception.

The IRS says that after the number is issued you can use it the same day to open a bank account and to apply for licenses and to file a paper tax return. Two other uses wait up to two weeks. Those uses are an electronic tax return and an electronic tax deposit. A TIN matching check can take that same stretch. Publication 15 and Publication 4275 cover the electronic deposit step.

Hiring waits with the number. The SBA lists the EIN as the first payroll setup step. Employment tax records come after you have people on the payroll. You do not need a payroll file on day one if you have no employees.

Prepare the books for the LLC before the EIN arrives

Early business finance setup is allowed before the number shows up. IRS Publication 583 says you may use any record system that clearly shows income and expenses. The books must show gross income and your deductions and your credits. For most small businesses the business checkbook becomes the main source of entries. Until that account exists, the supporting papers are the source. Start bookkeeping early so those papers are sorted on the day the account opens. These are your business records before the EIN.

SCORE says memory is not a record system. Write the cost down when you pay it. The IRS notes that you forget expenses when you wait.

Build four piles. Each one is a folder or a cloud folder. Use the same names you will use after the bank account opens.

• Formation. Articles of organization or incorporation. The operating agreement or bylaws. The state approval.
• Money spent before the EIN. Receipts and invoices and card statements from that period.
• Money customers pay you. Invoices and deposit notes. This pile may be empty. Create it anyway.
• Assets bought before the EIN. Publication 583 says these records show the purchase date and the cost and any improvements and how you use the item. Office furniture and machinery and equipment belong in this pile.

Organize each pile by year and by type of income or expense. Publication 583 asks for that order. The IRS names sales slips and paid bills and invoices and receipts and deposit slips and canceled checks. A payment record shows that money left. A second document has to show that the cost was a business cost.

Bench notes that ink on a paper receipt fades. The IRS accepts electronic records when the system can store them and reproduce them in a readable form. Scan the receipt when you get it.

Track expenses before the EIN

Track expenses before the EIN with a simple log. Each line needs the date and the amount and the payee and the purpose and the account that paid it. If the account is personal, write that on the line. Publication 583 treats personal funds you put into the business as their own deposit type. They are not customer income. They are not a loan unless you intend a loan. Name the source now so the first business deposit is not a mystery.

Startup costs are the expenses before you begin operations. Publication 583 lists advertising and travel and surveys and training. The publication treats them as capital costs. You can elect to deduct up to five thousand dollars of startup costs and up to five thousand dollars of organizational costs. Each of those amounts shrinks by the amount the costs exceed fifty thousand dollars. The rest is amortized. Form 4562 is where the IRS sends you for that election. The log you keep this week is what makes the election possible when you file.

A deductible cost has to be ordinary and necessary. Publication 583 says ordinary means common and accepted in your field. Necessary means helpful and appropriate. The cost does not have to be indispensable. A personal grocery run fails that test even when you pay it during the wait.

Pick the method and the categories

You choose cash or accrual when you file the first business return. Publication 583 says the books and the return must use the same method. A change after that first return needs IRS approval in most cases. Decide during the wait so the log matches the return you will file.

Under the cash method you record income when you receive it and expenses when you pay them. Under an accrual method you record income when you earn it and expenses when you incur them. If you hold inventory that you need in order to figure income, Publication 583 says an accrual method applies to purchases and sales. Some small businesses can stay on cash. Publication 538 is the IRS guide for that exception.

Bench groups every transaction into five types. Those types are assets and liabilities and equity and revenue and expenses. The line items under those types are your bookkeeping categories. A service business can start with service revenue and rent and wages. A shop that sells goods adds inventory and the cost of those goods. Bench says retailers use the name cost of sale and manufacturers use cost of goods sold. Delete a category you will not use. Bench uses gas and auto as the example. If you do not drive for the work, leave it off.

SCORE wants the expense ledger to catch accounts payable and payroll and rent and other costs that repeat. Add a category when a new kind of cost shows up. Bench says you can add an account during the year. Wait until year end to delete one. A mid-year deletion can scramble the history.

Talk with a bookkeeper or a CPA when you lock the first list. Bench recommends that conversation so the names match your field and match what the preparer expects.

Gather the bank packet while the number is in transit

The account itself waits. The packet does not.

The SBA lists the papers banks request most.

• The EIN, or a Social Security number for a sole proprietorship
• Formation documents
• Ownership agreements
• A business license

Some banks ask for more. Ask more than one bank for its list. The SBA says rates and fees differ. Compare introductory offers and interest and transaction fees and early termination fees and minimum balance fees.

The SBA says you should open the business account as soon as you accept or spend money as the business. The same guide says you open it once you have the EIN. If spending has started, the log from the prior section holds those costs until the account exists. When the account opens, move the company activity there. IRS Publication 583 says to deposit business receipts into the business account and to use that account for business costs.

The SBA describes the protection as limited. Separate funds support the liability line. They do not replace the LLC or an insurance policy.

Shop the account. Do not fund a third-party EIN site in order to speed the packet. The IRS issues the number at no charge.

If a tax deadline lands during the wait

A due date does not move because the EIN is in the mail.

The IRS says to file the return anyway. Write “Applied For” and the date you applied in the EIN space. Form SS-4 instructions say the same thing. Do not enter a Social Security number as the EIN on a return. The EIN is for the business. It does not replace your Social Security number on your personal return either.

A tax deposit can come due before the number arrives. The IRS says to send the payment to the service center for your state. Make the check or money order payable to the Internal Revenue Service. Show your name as it appears on Form SS-4. Show the address and the kind of tax and the period and the date you applied. Form SS-4 instructions describe the same payment and name the United States Treasury as the payee on the check. Use the payee line in the instructions for the form you are filing if those instructions differ.

You can ask about a mailed application. The IRS phone line for that question is 800-829-4933.

The day the number arrives

Save the confirmation where you keep the formation folder. The IRS says you can confirm a number with an entity transcript or a digital CP 575 in a Business Tax Account or Letter 147C. The notice from the application is the copy you will want first. If you lose it, the IRS tells you to check that notice and the bank and a license agency and a prior return before you call.

Open the business checking account with the packet you built during the wait. Deposit business receipts there from that day forward. Pay business costs from that account. Publication 583 says to note the source of each deposit and the type of each expense.

Move the pre-EIN log into the books. Each personal-account cost becomes a labeled entry. Personal funds stay out of the sales total. A loan stays a loan.

Then use the number for the tasks that were blocked. Licenses. A paper return. Hiring, if you are ready for payroll. Wait up to two weeks before you e-file or make an electronic tax deposit. The IRS states that delay even after it has issued the number.

If you applied twice and now hold two numbers, call 800-829-4933. The IRS will tell you which EIN to use. Do not guess.

A short feed of transactions can live in a spreadsheet. A longer feed needs a home so the first bank month does not land in one unlabeled list. The SBA lists an online service next to a bookkeeper and a CPA. QuickBooks Online is one place to keep the categories you built during the wait. Match each category to a real cost. Tie each entry to a receipt. Bench warns that a cloud tool creates a long cleanup when the setup is wrong and the error runs for a year.

Mistakes that waste the wait

• A paid EIN website. The IRS issues the number for free.
• Two applications. Online plus a fax can create two EINs. Use one method.
• A Social Security number on the business return. The IRS bars that substitute.
• A personal card with no log. The cost is real. The purpose is a memory. SCORE says that memory fails.
• Startup receipts in a kitchen drawer. Publication 583 ties the startup election to costs you can document.
• Opening the LLC account with no EIN. The SBA says the account comes after the number. A sole proprietorship is the stated exception.
• Deleting a category in June. Bench says to add accounts when you need them and to drop unused accounts at year end.
• An e-filed return the afternoon the EIN arrives. The IRS says to wait up to two weeks for electronic filing and electronic deposits.

Start the books this week

You can organize finances for a new business before the EIN email or the IRS fax arrives.

1. Confirm the entity is registered with the state. The IRS says to form an LLC or a partnership or a corporation before you apply.
2. Write the legal name exactly as the formation papers show it. The IRS limits the characters it will accept.
3. Name the responsible party. That person controls the entity and its assets. Have the Social Security number or ITIN ready. Finish the online form in one sitting.
4. If you must fax or mail Form SS-4, send it once. Note the date. Call 800-829-4933 if a mailed form goes quiet.
5. Open the four folders. File every receipt from money spent before the EIN.
6. Start the expense log. Mark personal-account payments as personal funds.
7. Choose cash or accrual. List the income categories and the expense categories you will use this year.
8. Call the bank. Ask which papers it wants. Set them in the formation folder so the account opens the day the EIN arrives.
9. Ask a bookkeeper or a CPA to look at the log and the category list before the first quarter ends.

If the log outgrows a spreadsheet, put those categories in QuickBooks Online and attach the receipts. The number has not arrived. The records do not have to wait for it.

The EIN unlocks the account and the hire and the license. The books you build this week are what make that first month readable. Next week repeats the same log. The statement will have a document behind every line.