Are you ready to start your own business? If you're like most entrepreneurs, you probably feel ready to take over the world. At the same time, you're aware of the challenges ahead. No matter your industry or type of business, there are a few steps you need to take before getting started. This will ensure compliance with the law and help you avoid hefty fines. An important step is to obtain a free tax ID number. Luckily, this process is quite straightforward and takes just a few minutes.
TL;DR (Too Long; Didn't Read)
You can obtain a free tax ID number online through the IRS website.
What Is a Tax ID?
A taxpayer identification number is an umbrella term for several types of identifying numbers, including EIN, SSN, ITIN, ATIN and more. Sole proprietorships, partnerships, corporations and other business entities may be legally required to apply for an EIN, which stands for employer identification number. It's the equivalent of a Social Security number for individuals.
The EIN is often referred to as the IRS number or federal employer identification number. As a business owner, you'll need this unique identifier to file tax returns, open a bank account, send invoices and conduct transactions. The IRS will use it to identify your business. Individuals, on the other hand, require a Social Security number. Non-U.S. citizens who are working or living in the United States are assigned an individual taxpayer identification number. Children who are in the process of being adopted by families residing outside the U.S. receive an adoption tax ID number.
Before you start a business, you should apply for an EIN. This number has nine digits and can be obtained for free. All you need to do is complete Form SS-4 on the IRS website. Three states, including Massachusetts, North Carolina and New York, issue their own business ID numbers in addition to the EIN.
Do You Need an EIN?
Not all businesses require an employer identification number. Sole proprietors may use their Social Security number under certain circumstances. However, they do need an EIN if they plan to hire employees, incorporate a limited liability company, form a partnership or purchase an existing business. The same applies to those who file for bankruptcy and have a solo 401(k) retirement plan.
Even if you may not be legally required to apply for an EIN, it's recommended to do it anyway. Many banks will not allow you to open an account for your business unless you have this tax ID number. Additionally, having an EIN may help reduce the risk of identity theft since you won't be required to provide your SSN to clients and companies with whom you do business.
Be aware that certain trusts require an EIN. The IRS uses this number to identify and track irrevocable trusts. In this case, the grantor permanently transfers his wealth or assets to beneficiaries, giving up ownership rights. A revocable or living trust, on the other hand, doesn't require an IRS number but only the grantor's SSN number. After his death, the Social Security number must be replaced by the trustee's EIN.
Whether you own a small agency or a corporation, you'll need an EIN for just about any business-related activity. This unique identifier is used for filing tax reports, applying for businesses permits and licenses, paying tax and opening checking accounts. If you ever decide to apply for a business loan, you'll be required to provide your IRS number.
Get a Tax ID Number
Now that you know what an EIN is, you might wonder how to obtain one. Any business located in the U.S. or U.S. territories can apply for a free tax ID number online as well as by fax, email or phone. However, the IRS recommends submitting your application through its website.
Access IRS.gov and then select "Employer ID Number (EIN)." Read the guidelines provided on this page and click "Apply for an EIN Online." Make sure you have a valid tax ID number at hand. The application form must be completed within 15 minutes. Otherwise, your session will expire and you'll need to start all over.
After you click "Apply for an EIN Online," you will be redirected to the EIN Assistant page. Click "Begin Application" and fill out the SS-4 form. If you're not comfortable submitting this information online, you can download the form and then send it by email or fax, but it will take longer to receive your EIN. During the application process, it's necessary to answer a few simple questions. You must select the type of business for which you need an EIN, provide your name and Social Security number, state why you need an IRS number and more. Online applicants are issued a free tax ID number immediately upon completion. Remember to print the confirmation notice.
If your business was incorporated outside the U.S., contact the IRS at (267) 941-1099. In this case, you cannot complete Form SS-4 online. Be aware that you'll need a new EIN if you ever change your business structure or ownership.
How to Find Your EIN
It's not uncommon for business owners to lose or misplace their EIN. For example, if you own two or more companies, each will have its own federal tax ID number, which may seem confusing.
First, try to find the confirmation notice issued by the IRS when you applied for the EIN. If you don't find it, check your bank statements, business licenses, tax returns and other legal documents. Your tax ID number should be printed on these forms. Another option is to contact your bank and ask for this information. If everything else fails, reach out to the IRS at 800-829-4933. This service is available to authorized persons only, such as corporate officers, business owners, sole proprietors and trustees.
To find another company's EIN, conduct a tax ID lookup online. There are several commercial databases you may use, such as EIN Finder, FEIN Search and Real Search. In general, these platforms charge a monthly or annual fee. Real Search, for example, holds information on over 15 million businesses. All you have to do is enter a company's name in the designated field and click "Search" in order to get the data you need.
Another option is to use SEC.gov, a free online database with more than 21 million filings. This service is provided by the U.S. Securities and Exchange Commission and provides information on public companies. If you need to find a charity's EIN, head over to the Melissa lookup database, which offers free access to information on over 1.5 million nonprofits across the U.S.
Things to Consider
Obtaining a free tax ID number is simple. Just make sure you apply for one right after you register your business. Also, it's important to select a legal structure for your company, such as an LLC, partnership, corporation, sole proprietorship or nonprofit organization. After you obtain an EIN, you may open a bank account, get business insurance and apply for licenses or permits. Check out the U.S. Small Business Administration website to see the exact steps needed.
Don't hesitate to contact an attorney or a business consultant for help. Forming a corporation, for example, is not as simple as registering a sole proprietorship. Each business structure is subject to different laws and has specific requirements.
- IRS: Apply for an Employer Identification Number (EIN) Online
- IRS: Taxpayer Identification Numbers (TIN)
- IRS: State and Federal Online Business Registration
- Investopedia: Irrevocable Trust
- IRS: Does a Trust Need a Tax ID Number?
- Fundera: Business Tax ID Number: IRS EIN Lookup, Plus How to Change an EIN
- You can also apply for your EIN by fax or mail, but it will cost you postage or a non toll-free fax charge.
Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.