Operating a business often calls for the need to apply for a federal tax ID number. Also known as an Employer Identification Number, this special code enables the U.S. Internal Revenue Service to identify a specific business for taxation purposes.
The process to apply for a federal tax ID number is fairly straightforward, but it does require answering questions about the specific business. There are a number of options available to facilitate the application process.
Step 1 – Determine the Need for an EIN
Before going through the process to apply for a federal tax ID number, it is important to determine if one is really needed. Not all business owners will need to apply for a federal tax ID number. In obtaining an EIN requires:
- Having employees
- Operating a business as a partnership or corporation
- If the business files tax return for employment, excise, alcohol, tobacco or firearms
- If income taxes are withheld
- If a Keogh plan is in place
Step 2 – Gather Important Paperwork
The actual process to apply for a federal tax ID number is reasonably short, but it is helpful to gather needed information in advance of filling out the form. The types of information that will be required to fill out the application include:
Business identifiers – The legal name, trade name, mailing address of the business and also the name of the principal officer are requested on IRS tax ID forms.
The type of entity – It is important to describe the type of operation that is applying for the EIN. For example, a sole proprietorship, a corporation, nonprofit or church.
The reason for the application – A business must describe why it is applying for a federal tax ID number. The options include hiring employees, starting a new business and bringing a firm into compliance with IRS withholding regulations.
The number of employees – This can be an estimation for anticipated hires over a 12-month period.
Step 3 – Choose the Application Method
The next step involved in applying for a federal tax ID number calls for deciding exactly how to apply. The IRS does provide a number of different avenues, including:
- Mail-in applications using IRS form SS-4
- Calling the Business & Specialty Tax Line at 1-800-829-4933
- Faxing a completed SS-4 form to a specific state’s IRS office
- Online filing using the IRS web site
Step 4 – Filling Out The Application
Once everything is in place to apply for a federal tax ID number, the final step involves filling out form SS-4. This is a short, one-page form that should take only minutes to complete if all pertinent information has been gathered in advance. It can take several weeks for the IRS to respond to an application by mail or fax. An EIN will result immediately with online applications. The number may not be active for several weeks, however.