Every business owner has to have a Federal Tax Identification Number. It is also known as an Employer Identification Number (EIN). It is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification. The IRS uses this ID to identify your company. According to the IRS, most businesses should have an EIN. The following are some of the criteria to show whether your company may need an EIN.
- You have employees working in your company
- Your company is registered as a corporation
- You withhold taxes on income other than wages
- You have dealing with organizations listed with the IRS
If this is your first time setting up a company, you may not know how to get federal tax id on your own. Free application can be done on IRS’s website. Applicants will need to complete an online form and the process is fast and easy. If application is done on a weekday from Monday to Friday between 7 a.m. and 10 p.m. (local time), your tax id will be sent to you immediately. Application can also be done through fax or mail.
Before applying for the tax id, you will have to get ready certain details e.g. the name and taxpayer’s ID number of the person responsible for the business. Details such as the company’s principal officer, owner, general partner, or grantor and etc. will be required.
The tax id or the EIN belongs to the registered business and it will never be cancelled. This number will never be reassigned to another business. Upon request, this number can be closed by the IRS and is available if there is a need to re-open the account by the business owner upon request to the IRS in writing.
Identifying your business with the proper entity is important. It can help determine many things e.g. like how much you get taxed on profits. In case there is a lawsuit, how you and your company will be treated in the lawsuit, and the type of bank account you’ll be able to open.
If there is any possibility that you are not sure about the proper entity of your business, you can run through the simple survey at the Gov Doc Filing website to help you decide. The using of this website is only for general informational purposes and does not constitute advice of any kind.