Setting Up a Federal Tax ID Number for Your Business

What Is a Federal Tax ID Number?

Federal Tax ID NumberFederal tax identification numbers are 9-digit numbers assigned and used by federal regulatory agencies (including the IRS) to identify your business. Also known as an “Employer Identification Number” or “EIN,” they’re required for most businesses to report employee federal tax withholding, among other things.

There are some situations where it is not necessary to obtain a federal tax ID number—for example, if your business is operating as a sole proprietorship or Limited Liability Corporation (LLC) that does not have any employees. In such circumstances, using your personal Social Security Number is a legitimate option for tax purposes. However, even in these cases, it may be necessary to get a federal tax ID number for your business. Fortunately, the federal government has streamlined the process and made acquiring an EIN easy, fast, and free.

Does Your Business Need a Tax ID Number?

Put simply, any business with employees, or a business that must pay taxes on the goods or services it provides, should acquire a federal tax ID number. This includes most sole proprietorships, partnerships, and LLCs, as well as corporations, non-profits, government agencies, trusts, and estates.

As previously mentioned, some sole proprietorships and LLCs that do not have employees do not legally require a federal tax identification number in order to operate. Likewise, some corporations (S Corporations, corporate divisions, and corporate mergers, for example), may not need to obtain a federal tax ID.

Regardless, it’s generally wise to err on the side of caution if you are unsure of your legal obligations. Getting a federal tax identification number or EIN is free, easy, and in no way detrimental to your business. For a thorough discussion of when a federal tax ID is required, you may want to consult the following article on EINs and different business structures.

How Do You Get a Tax ID Number?

If you’ve determined that you want to set up a federal tax identification number, you can apply online using the IRS web site. The process is straightforward—all you have to do is provide answers to a series of questions and the IRS will provide you with your federal tax ID number immediately.

You can also contact your local IRS Field Office using their online directory, or call the IRS Business and Specialty Tax Hotline at 800-829-4933. If you’re more of a pen-and-paper kind of person, then you’ll want to fill out Form SS-4 and mail it in.

Author:

After graduating with a B.A. from Occidental College, Ben Wills worked for several political non-profits on economic policy, government transparency, and public accountability issues.