Does My Self-Directed IRA Need an EIN?

Does my selfdirected IRA need an EIN

If investing in real estate, precious metals or other alternative assets is something you are passionate about and would like greater freedom with your retirement funds, a self-directed IRA (SDIRA) may be right for you. Be sure to choose providers who specialize in these investments for best results.

Note that SDIRA custodians typically do not provide investment advice, so you will need to conduct your own research regarding potential investments.

What is an EIN?

An Employer Identification Number, or EIN, is a nine-digit number assigned by the IRS that serves to keep personal and business finances distinct, helping prevent identity theft. You can apply for your EIN online on the IRS’s website, or submit Form SS-4PDF by mail – either way it’s important that when applying, all pertinent details such as legal name, mailing address, type of entity type and responsible party details are submitted before submitting an EIN application to ensure smooth process for both applications and approval by IRS staff.

The IRS advises applying for an EIN online using their “EIN Assistant” tool as this process is faster and more convenient. Paper applications may also be submitted; in this instance, all relevant information must be included on both forms. Existing entities may require new EINs when their ownership structure changes, their business is restructured as different entity type or they change names; when this occurs, the IRS will notify you accordingly.

How do I get an EIN?

Acquiring an EIN (Employer Identification Number) can be a relatively straightforward process for small businesses. An EIN is a nine-digit number that uniquely identifies your entity in the US. While an EIN isn’t mandatory for all businesses, the IRS recommends all those employing employees or filing certain tax returns such as Form 990-T to acquire one for reporting unrelated business income (UBTI).

An EIN differs from a Social Security number and can be obtained by filling out an online application on the IRS website. Although online applications tend to be the fastest and simplest method, applicants can also complete Form SS-4PDF by mail or fax. Regardless of which way the EIN is obtained, its recipient – typically individuals — must provide accurate and complete information; once assigned by the IRS it should arrive to them within four weeks; online applications typically yield results instantly upon submission.

Do I need an EIN for my IRA?

Though IRAs typically are exempt from federal taxes, their investment flexibility often results in information reporting requirements with the IRS relating to Unrelated Business Taxable Income (UBTI) and Unrelated Debt-Financed Income (UDFI).

An LLC investment allows your SDIRA to own real estate or other alternative assets, while giving you more control over the checkbook. Your SDIRA owner typically serves as the manager of the LLC to reduce transaction fees and complete investments faster.

However, an LLC needs its own FIN/TIN/EIN in order to file annual tax returns and provide K-1s for each owner. Furthermore, having its own EIN may help when investing in properties owned by multiple entities like an IRA and its spouse’s IRA – such as property taxes, garbage bills or sewer services. Your custodian will require this number in order to complete Form 5498 which tracks the value of investments held within an IRA account.

Do I need an EIN for my LLC?

Most small businesses do not need an Employer Identification Number (EIN), although some types of businesses may find an EIN useful as it allows the entity to separate itself from its owner for tax purposes and offers potential financial advantages.

Example: If an IRA owns 100% of an LLC (commonly referred to as “checkbook control”), that LLC will need an EIN so it can be differentiated from its IRA owner and used for identification purposes. Furthermore, when investing through disregarded entities (known as “disregarded entities”) using an LLC structure (known as “disregarded entities”) it must include their EIN on its K-1 form for tax reporting purposes.

The IRS provides an efficient and free EIN application process. Applicants may choose from applying online, by fax, or mail; those applying online will get their EIN instantly while those applying via fax/mail will have it within four business days.


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