What is an Employer Identification Number (EIN)?

An Employer Identification Number (EIN) is a unique identifier specifically assigned to a business entity by the Internal Revenue Service (IRS). This number is crucial for various tax-related activities and is used to identify a business for federal tax purposes. The EIN allows employers to report taxes, withholdings, and other employee-related information correctly.

In addition to tax reporting, having an EIN is essential for various business activities, such as opening a bank account in the business's name, applying for business licenses, and filing tax returns. Businesses can also use their EIN when hiring employees, as it is necessary for reporting employment taxes.

The other options do not accurately describe the EIN's role or significance. For instance, while employee identification relates to individual workers, it does not define the business entity's identity, which is the purpose of an EIN. A tax category for individuals pertains more to personal tax identifiers, not business-related identifiers. Lastly, an internal company code is typically for organizational purposes within a company and does not serve the same function as an EIN. Thus, the uniqueness and specific purpose of the EIN for identifying business entities affirm its classification as the correct answer.