This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!
A federal tax ID number is also known as an Employer Identification Number, or EIN. It’s a 9 digit number assigned to a business by the IRS.
The US Internal Revenue Service uses these numbers to:
- Identify businesses located in the United States and its territories
- Recognize a business for purposes of tax documentation
- Identify what business employees filing taxes work for
Essentially, any business that has employees needs to obtain one, but depending on such things as the type of tax return you file, you may need one even if you have no employees. You can find out whether or not you need to obtain an EIN on the IRS website, or use the checklist here (last updated August 2015).
If you can answer ‘yes’ to any of the IRS’s questions below, you need to apply for an Employer Identification Number:
- Do you have employees?
- Do you operate a business as a corporation or a partnership?
- Do you file an Employment, Excise, Alcohol, Tobacco, or Firearms tax return?
- Do you withhold taxes on income paid to a non-resident alien, other than wages?
- Do you have a Keogh plan?
- Are you involved with trusts, except certain grantor-owned revocable trusts, IRAs, or Exempt Organization business income tax returns?
- Are you involved with Estates?
- Are you involved with real estate or mortgage investment conduits?
- Are you involved with nonprofit organizations?
- Are you involved with farmers’ cooperatives?
- Are you involved with plan administrators?
How to apply for a federal tax ID number:
Applying is a simple process, usually done online. If you prefer to apply via fax, mail or telephone, you can do this too.
It’s also worth remembering that applying for a tax ID # is free. If you’ve been asked to pay to do so, you’re on the wrong site!
You can apply for your federal tax ID # here.
During the application process you will be asked to provide basic information including details regarding your business structure or the type of organization you operate, personal information, addresses, and other details relating to your business.
If you are not applying yourself, you will need to select a person designated as the “responsible party” for this application; if you are the small business owner, it will most likely be yourself, but it could also be a business partner if you have one. Whoever the responsible party is, they will need to have a valid taxpayer identification number (such as a social security number) to apply.
Once you have completed the online EIN application, you can begin using the number immediately. This will come in handy if you are:
- Opening a bank account
- Filing a tax return by mail
- Applying for business licenses
That said, it will take a couple of weeks for your EIN to become a part of the IRS’s permanent records. So, if you are looking to make an electronic payment, file an electronic return or pass an IRS Taxpayer Identification Number (TIN) matching program, you will need to wait until you are a part of the permanent record.
What happens if I lose my federal tax ID number?
Once you receive your number, take a moment to write it down. You will need easy access to this number throughout your business’s life so it’s important you don’t actually lose it! If you do lose it or forget it, however, you can call (800) 829-4933 and choose EIN from the list of options. Find out more about recovering a federal tax ID number here. (last updated August 2015).
I already operate a business, do I need a new tax ID number?
In certain circumstances, you may need to replace your tax ID number. These are situations which affect the structure of your business, such as taking on a partnership or filing for bankruptcy. If your business is going through a structural or organizational shift, look into whether applying for a new EIN is right for your circumstances.
If you have simply lost track of your number, it is not necessary to apply for a replacement. You can contact the IRS directly and they will provide it for you once you answered a few questions to confirm your identity.
Key tax resources
If you are applying for a federal tax ID number with taxes in mind, it may be worth taking a look through some of the following resources:
- The IRS provides great video content on what business owners need to know about federal taxes.
- A Bplans Small Business Taxes Webinar with CEO of TaxAlli.com, Zach Olson.
- 5 Tax Preparation Tips Every Entrepreneur Should Know
- Must-Know Tax Tips For Freelancers
Do you have any questions related to applying for an EIN?