Just as the need to file taxes is universal, all individuals and most businesses are required to have identification numbers in order to file those taxes. Known as an Employer Identification Number or EIN, a taxpayer ID number is used to identify a business for tax purposes, and is similar to a Social Security number.
However, not all businesses are required to have taxpayer ID numbers. For example, sole proprietorships represent one type of business that can go without obtaining one. But other formal and informal organizations--such as homes with non-resident household employees, owners of Keogh plans and even nonprofit organizations--do require a unique tax identification number.
Who is required to have a Taxpayer ID number?
You need to apply for a taxpayer ID number if you answer "Yes" to any of the following questions:
* Do you have employees?
* Do you operate your business as a corporation or a partnership?
* Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
* Do you withhold taxes on income, other than wages, paid to a non-resident alien?
* Do you have a Keogh plan?
* Are you involved with any type of trust organizations, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns?
* Are you involved with any type of Estates?
* Are you involved with any type of Real Estate Mortgage Investment Conduit?
* Are you involved with any type of Non-profit organization?
* Are you involved with any type of Farmers' Cooperative?
* Are you involved as any type of a Plan Administrator?
How do I apply for a Taxpayer ID?
The IRS page How to Apply for an EIN identifies four means of applying for an EIN. Be aware that some Internet businesses offer taxpayer ID or EINs for a small charge. However, please note that these ID numbers are provided to applicants free of charge by the IRS through a simple process.
The online taxpayer ID number application is simple to complete and an EIN is issued during the session as soon as the application information is validated. Online application is intended for businesses or entities with principal operation or residence in the U.S .or U.S territories. According to the IRS, the principal officer, owner, trustor, general partner, grantor, etc. must have a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number) to be able to use the online application. (Special note: As of May 21, 2012, taxpayer ID numbers have been limited to one application per day per responsible party through all application channels.)
Tax ID numbers can be obtained by calling the Business and Specialty Tax Line at 800.829.4933, Monday through Friday, from 7 a.m. to 7 p.m. local time. As with the online application, the EIN is issued during the telephone contact.
Taxpayers can fax completed Form SS-4 applications to the appropriate fax number of their state branch (see Where to File: Business Forms and Filing Addresses), after making sure all of the required information is filled out in Form SS-4. If the entity is determined to require a new EIN, one will be assigned. If the taxpayer's fax number is provided, a fax will be sent back with the EIN within four business days.
If you’re sending your completed EIN application by mail, expect processing to take about four weeks. Make sure the Form SS-4 contains all of the required information. To locate the mailing address for your Form SS-4, go to Where to File Your Taxes for Form SS-4.
Many of the new entities now required to obtain a taxpayer ID number also will be required to file new forms specific to their functions. Moreover, even businesses familiar with the EIN system will need to know the requirements for when a new taxpayer ID number is required.
If you and your business need guidance on how to obtain a taxpayer ID number, consider reaching out to a payroll and tax service. Paycor helps businesses both large and small with everyday tax issues, from obtaining a taxpayer ID number to helping business with quarterly and annual tax filing. Contact us today for more information.
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