You need to obtain business tax ID but you do not know the particulars – you just know that business tax ID is also called EIN (Employer Identification Number), which refers to a unique set of nine digit numbers assigned by the IRS (Internal Revenue Service) for business entities. In the eyes of the IRS, the purpose of EIN is to track down tax returns of a business.
So, who needs a tax id? You need to obtain EIN if you fall under one of the following categories:
- If you have employees.
- If you file an employment-related tax return.
- If your business is a corporation, LLC (Limited Liability Company) or business partnership.
- If you file excise, alcohol, firearms, and tobacco tax return.
- If you have Keogh plan
- If you are involved with mortgage investments, nonprofit organizations, estates, and trusts.
- If you do not want to use your SSN (Social Security Number) for the business.
- If you prefer the financial year of your business to be the same as the calendar year closing – in December.
If you fall under one of the categories mentioned above, you need to obtain EIN. If you have EIN, you can easily use it to file tax returns, apply for business permits or licenses, open bank accounts, and credit lines, and make electronic payments. Here are other things to remember when applying for EIN:
There is the right time to apply or obtain EIN
If you are a sole proprietor or general partnership, you can apply any time for EIN. However, if you are a corporation or LLC, you can only apply after the formation document or also called Articles of Incorporation/Articles of Organization is approved.
You can change your EIN under certain circumstances
Typically, EIN is meant for the entire lifetime of your business. However, you must be aware that some circumstances need a change of EIN. These circumstances include the following:
- If you change the business name or location.
- If you filed for bankruptcy.
- If there is an S-corporation election.
- If there is a change in your business entity.
- If the corporation receives a new charter especially from the secretary of the state.
There are four ways to apply for an EIN
You must know that there four ways to apply for an EIN. The online application is the fastest way – within 20 minutes, you will have your EIN. After getting it, the EIN can be used immediately.
Other ways include phone, fax, and regular mail. Of the three options, the longest is regular mail because it could take four weeks. With this, you should try to avoid it. You only consider the phone if you are outside the United States. If you consider fax, make sure that you have a fax number.
EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system can help you
If you search for the EIN of a nonprofit organization or publicly traded company, there are directories that you can consider for help. You can try EDGAR, which is maintained by the SEC (Securities and Exchange Commission).