File business taxes and avoid tax penalties
As we just mentioned, certain kinds of businesses must get an EIN to file taxes. So what happens if you’re required to get an EIN but fail to do so? One pointer is to do your research early and figure out if you need an EIN well in advance of tax time. Don’t wait until tax day nears because depending on your method of application, the IRS can take up to five weeks to assign you an EIN.
If you don’t have your EIN by tax day, and were supposed to get one, you have to fill out specific paperwork to notify the IRS. If you forget to do that, the IRS might not accept your filing, and you could face penalties for a late return.
Plus, for certain types of tax deductions, such as home office deductions for business, your chances of an IRS audit decrease if you have an EIN.