Does My Business Need a Tax ID Number?
An employer identification number (EIN), also called a tax identification number or taxpayer ID, is required for most business entities. As its name implies, this is the nine-digit number used by the Internal Revenue Service (IRS) to identify businesses and track their files. Whether you need a federal tax identification number will primarily depend on whether or not you have employees. The following information will help you decide whether your business needs an EIN.
Many states will also require that your business have a state tax ID number that is different than an EIN. Contact your state department of revenue to find out what the rules are for state tax IDs in your state.
Tax ID Numbers at a Glance
A federal tax ID number is not required if you are self-employed, operate a sole proprietorship, or own a limited liability company (LLC) with no employees. In those situations, you would simply use your own Social Security number (SSN) as a tax ID. You must obtain an EIN if you are a sole proprietor who files pension or excise tax returns. Even partnerships without non-partner employees are required to have tax ID numbers.
While new businesses will always need to request a new tax ID number, there are certain instances where business owners will need to request a new EIN (See "Do You Need a New EIN?" from the IRS for more details):
- An existing business is obtained, either through a purchase or inheritance, by someone who plans to run it as a sole proprietorship
- A business changes from a sole proprietorship to a corporation or partnership
- A business changes from a partnership to a corporation or sole proprietorship
- A business changes from a corporation to a partnership or sole proprietorship
- An individual owner dies, and the business is taken over by the estate
Getting an Employer ID Number
You may apply for a tax ID online, via telephone, by fax, or through the mail, but doing it online will save you time. Help for the different methods follows:
- Online: This is the preferred method for obtaining a tax ID number, available for all business entities whose principal office or legal residence is in the U.S.
- Telephone: Call the Business & Specialty Tax Line at (800) 829-4933 between 7:00 a.m. and 7:00 p.m. (local time), Monday through Friday. International applicants must call (267) 941-1099.
- Fax: Complete IRS Form SS-4 (PDF) and fax it to the appropriate IRS number. The IRS will send a return fax with your tax ID within four business days.
- Mail: Complete IRS Form SS-4 (PDF) and send it to the appropriate IRS address. Your EIN will be mailed to you.
You will need to apply using your business's legal name. That means you will not need to file for a new EIN if you are operating under a "doing business as" (DBA), which allows it to operate under a different business name.
Foreign Nationals: Individual Taxpayer Identification Number
For those who do not have an SSN, such as resident and non-resident aliens, they may need to apply for an individual taxpayer identification number (ITIN), which is also nine digits. To apply, you'll need to file IRS Form W-7: IRS Application for Individual Taxpayer Identification Number. You will be asked to provide proof of your legal resident or visitor status and will have to file it through an Acceptance Agent authorized by the IRS.
Still Have Questions? Talk to a Lawyer
Unless you operate a sole proprietorship or an LLC with no employees, you will most likely need a tax ID number for your small business. The best way to learn about tax ID numbers, and get legal advice on other aspects of business tax law, is to speak with a skilled tax attorney near you.
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