EIN Application Delays Hurt Taxpayers and Businesses Alike
EIN delays create major hurdles for taxpayers and businesses, slowing operations, blocking compliance, and undermining opportunities. Learn why faster solutions are critical.
When Taxpayers Struggle to Obtain an EIN – Everyone Loses
Obtaining an Employer Identification Number (EIN) should be the first and simplest step in starting a business. However, many taxpayers encounter significant obstacles that delay their ability to open bank accounts, hire employees, or comply with federal tax filing requirements. When the IRS EIN application process becomes slow, confusing, or inaccessible, it harms entrepreneurs, tax professionals, and the broader economy.
What Is an Employer Identification Number (EIN)?
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service to identify a business for tax purposes. It functions similarly to a Social Security Number but is used exclusively for business entities, including:
- Corporations
- Partnerships
- LLCs
- Nonprofit organizations
- Trusts and estates
- Sole proprietors hiring employees
- International companies operating in the U.S.
Businesses need an EIN to:
- Open commercial bank accounts
- Apply for business licenses
- File payroll taxes and information returns
- Hire and pay employees
- Establish business credit
- Report income and deductions to the IRS
The IRS issues EINs free of charge, but the process is often hindered by outdated systems and inconsistent policies.
What Is an Employer Identification Number (EIN)?
Common Challenges Taxpayers Face When Applying for an EIN
Despite the importance of obtaining an EIN, the IRS system has multiple pain points. These challenges affect new business owners, non-profits, international investors, and tax professionals who assist their clients.
1. Online Application Limitations
The IRS EIN online application the most convenient method has several restrictive limitations:
- 15-minute inactivity timeout: Applicants must complete the entire process in one uninterrupted session. The system logs them out after 15 minutes of inactivity, forcing them to start over.
- No option to save progress: The form cannot be paused, saved, or resumed later. Any interruption, computer crash, browser freeze, or lost connection—results in losing all progress.
- Browser and compatibility issues: Many taxpayers report the system only works reliably on certain browsers such as Internet Explorer or older versions of Chrome. This inconsistency causes failed submissions or unexpected errors.
- Limit of one EIN per responsible party per day: The IRS restricts the issuance of EINs to one per day per responsible party, even when managing multiple business entities.
- System overload error codes: During peak hours, applicants are frequently met with messages like: “The system is unavailable.” “Please try again later.” “We cannot process your request at this time.”
These errors create confusion and force taxpayers to attempt the process multiple times.
2. Barriers for International Applicants
International taxpayers face some of the toughest EIN obstacles:
- They cannot use the online EIN application system, regardless of circumstances.
- They must submit Form SS-4 by fax or mail, often waiting 4-8 weeks for processing.
- Some global banks require an EIN before opening a U.S. business account, creating a bottleneck for foreign-owned entities.
- Phone assistance for international EIN requests is often inconsistent or unavailable.
This limits U.S. competitiveness by making it harder for foreign businesses to invest and operate in the country.
3. Frequent EIN Application Errors
Even when applicants provide correct information, IRS systems commonly generate automatic error codes:
- Name/SSN mismatches: A minor discrepancy or formatting inconsistency between a responsible party’s name and Social Security Number can instantly stop the application.
- Invalid SS-4 data entry errors: The IRS may reject entries that their system fails to validate even if the information is accurate.
- Overloaded system errors: Applicants often receive messages asking them to “try again later,” which provides no guidance or solution.
These errors force taxpayers to call the IRS, wait on hold for extended periods, or repeat the application process multiple times.
4. Processing Delays and IRS Backlogs
IRS staffing limitations and outdated systems lead to prolonged processing times, especially for paper submissions.
Effects of delayed EIN processing:
- Businesses cannot open bank or merchant accounts.
- Nonprofits cannot apply for grants or begin operations.
- Employers cannot set up payroll systems or file required employment taxes.
- Entrepreneurs lose valuable business opportunities while waiting for a simple tax identification number.
In some instances, taxpayers report receiving EINs they did not request, raising concerns about identity theft or filing errors.
Common Challenges Taxpayers Face When Applying for an EIN
5. Challenges Obtaining the EIN Confirmation Letter
The EIN confirmation letter, known as CP 575, is essential for:
- Opening business bank accounts
- Verifying the business’s legal identity
- Completing licensing paperwork
- Financing and loan applications
However, challenges include:
- The IRS only displays the CP 575 once at the end of the online application.
- If the taxpayer does not download it immediately or if there is a technical issue the letter cannot be reprinted.
- Taxpayers must wait 30 days before requesting a 147C EIN verification letter, creating further delays.
Banks and lenders typically require an EIN confirmation letter, and lack of this document can stall business operations.
Why EIN Delays Matter
- EIN delays prevent businesses from legally operating
Without an Employer Identification Number (EIN), businesses cannot open bank accounts, apply for licenses, or file mandatory tax forms. Many legal and financial steps required to launch a business are blocked until the EIN is issued, causing new companies to miss deadlines, delay operations, or lose important opportunities.
- EIN delays restrict access to banking and financial services
Banks require an EIN to open business accounts, approve loans, or set up merchant processing. A delayed EIN means entrepreneurs cannot receive payments, deposit funds, or secure financing. This is especially harmful for startups and small businesses that rely on immediate access to capital to begin operations.
- EIN delays disrupt tax compliance and payroll setup
Federal and state tax filings including payroll taxes require a valid EIN. When issuance is delayed, businesses cannot onboard employees, process payroll, or withhold and remit employment taxes. These delays can result in compliance issues, penalties, and onboarding setbacks for newly hired workers.
- EIN delays harm economic growth and discourage entrepreneurship
Small businesses are a major driver of job creation and local economic activity. When entrepreneurs face prolonged EIN processing times, they encounter unnecessary barriers that slow business formation and reduce economic momentum. This disproportionately affects first-time founders, immigrants, and low-income entrepreneurs.
- EIN delays increase vulnerability to scams and misinformation
When taxpayers experience delays or system errors, they may turn to third-party websites that charge unnecessary fees or engage in fraudulent practices. A slow and confusing EIN process increases the likelihood of identity theft, misinformation, and exploitation of taxpayers who simply want to comply with the law.
The Path Forward: How the IRS Can Improve the EIN Process
A modern economy needs a modern tax administration. Improving the EIN process would help millions of taxpayers and strengthen business creation in the U.S.
1. Expand Online Access
The IRS can reduce delays by:
- Allowing international taxpayers to apply online
- Enabling applicants without SSNs or ITINs to use secure alternatives
- Building a universally compatible online application system
Expanding digital accessibility would drastically shorten processing times.
2. Improve User Experience
Improvements should include:
- Extending the 15-minute session timeout
- Allowing applications to be saved and completed later
- Eliminating avoidable error codes
- Ensuring browser compatibility and stable connections
A modern interface would dramatically reduce taxpayer frustration.
The Path Forward: How the IRS Can Improve the EIN Process
3. Reduce Processing Backlogs
To address systemic delays, the IRS could:
- Reallocate resources during peak filing season
- Prioritize EIN application processing
- Improve internal workflows for Form SS-4 submissions
Faster processing means faster business creation.
4. Strengthen Communication and Transparency
Taxpayers would benefit from:
- Clear explanations for EIN delays
- Real-time status updates
- Alerts reminding applicants to download their CP 575
- Better guidance on required information and documentation
Proactive communication reduces confusion and IRS call volume.
Conclusion
The Employer Identification Number (EIN) is a foundational requirement for launching a business in the United States. When taxpayers face delays or errors in obtaining an EIN, the impact can slow down business formation. FastFile simplifies this process by guiding customers through a quick, accurate EIN application, reducing mistakes and helping them receive their EIN faster.