If you’re starting a new business, you’ll need to get an Employer Identification Number or EIN from the Internal Revenue Service (IRS). The EIN is what the IRS uses to identify your company for tax purposes. Often the EIN is also referred to as a Federal Tax Identification Number.
The applying process for a new EIN involves filling out IRS Form SS-4, Application for Employer Identification Number, which I have linked to here.
In the past, applying for an EIN involved filling out and mailing or faxing in IRS Form SS-4 new business information to the IRS, then waiting for a response. However, now you can simply apply for your EIN online, and you will typically (if you’ve filled out the application correctly and don’t run into any technical hiccups) receive your new tax id almost instantly.
The online application for an EIN essentially walks you through questions that you would need to know the answers to if you were to fill out the IRS Form SS-4 on paper. I will describe those questions and review the basics regarding what they mean in terms of making sure your company is presented correctly to the IRS.
If you make a mistake submitting the information for your new company to the IRS, there are methods you can use to correct things such as your business name, your location address, or the type of company your EIN represents. I’ll explain those methods for correcting information later. For now, we’ll focus on the application process so you can go ahead and obtain your new EIN.
If you are working with an attorney or other professional advisor to set up your new company (or for whatever reason you need an EIN), it’s likely that they already know the steps involved in applying for and obtaining an EIN for a new business. Unless they have some reason for not completing the entire process of making the entity legitimate in the eyes of the IRS by filing for an EIN, it would be easier for you just to simply ask them to apply for the EIN for you. They can do so by filling out the Third Party Designee section of the Form SS-4 application.
If you prefer to mail or fax in the physical IRS Form SS-4, you can do so by printing out the form, filling it out, and using the information below to send in the form.
IRS EIN Application Mailing Address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
IRS EIN Application Fax Number:
Fax: (855) 641-6935
Do You Need an EIN?
In some situations, you may not need an EIN. For instance, if you are operating a small business as a sole proprietor or as an LLC entity and you don’t have any employees, you can simply use your social security number and report your business taxes through your personal tax returns.
However, there are lots of reasons, even aside from starting a new business, that the IRS requires you to get a tax identification number so that they can keep track of you and the taxes you owe them.
Here is a the list of reasons or circumstances provided by the IRS for needing to obtain an EIN:
- Started a new business
- Hired or will hire employees, including household employees
- Opened a bank account that requires an EIN for banking purposes
- Changed the legal character or ownership of your organization (for example, you incorporate a sole proprietorship or form a partnership)
- Purchased a going business
- Created a trust
- Created a pension plan as a plan administrator
- Are a foreign person and need an EIN to comply with IRS withholding regulations
- Are a withholding agent for taxes on non-wage income paid to an alien (such as an individual, a corporation, or a partnership)
- Are a state or local agency
- Are a federal government unit or agency
- Formed a corporation
- Formed a partnership
- Administer an estate formed as a result of a person’s death
- Represent an estate that operates a business after the owner’s death.
Preparing to Apply for an EIN
When you apply for an EIN, there are lots of details about the business that the IRS will want to know, such as what type of entity you have created that will be associated with the EIN, how many people are associated with that entity, in which state the entity is physically located, and other details.
Prior to beginning your application, especially if you’re planning to do it online, you should make sure you have all the information you need available to you. The IRS.gov online application times out after 15 minutes of inactivity, making you start over if you have to stop to go find out answers to questions being asked on the form. Reviewing the actual SS-4 form manually before starting the online application process is helpful.
The EIN Application
The application itself is pretty straight-forward if you have been involved in setting up the business entity and are familiar with the business and its purposes. Decisions about what type of entity to use are typically determined in counsel with help from an accountant and/or attorney, with whom you’ve likely sat down and discussed the nature of your business, how much income you’re planning to generate from it, and other details that would have helped you make an informed decision about setting up the best kind of entity for your purposes.
The IRS will wan to know the entity’s name, administrator details, and the address of its physical location. It will also ask for the name and tax id of the person responsible for submitting the EIN application.
The application asks for which type of entity is being set up. The most common business type is an LLC, which, for many businesses, creates the best scenario in regards to minimizing liability and tax obligations.
The IRS also wants to know the reasons you’re applying for a new EIN. Most commonly, new EIN applications are submitted to create a new business. They want to know information about when the business was started and what it’s hiring and wage payment plans are. They also want to know what type of industry the business is in and details about what the company does.
In addition to providing instructions with Form SS-4, the IRS offers telephone assistance, but their wait times are long, and often their support is not very helpful. If you need additional help with your EIN application, you’d be better off talking to an accountant or attorney who’s familiar with the process.
Changing Your Business Details
After you have submitted the IRS Form SS-4 and received your EIN, you may need to make changes to your business. The IRS has mechanism for updating the information you originally submitted to them about your business, including:
Change the name of your business: This procedure depends upon whether your entity is a sole proprietorship, a corporation, or a partnership. For a sole proprietorship, you write a letter to the IRS office where your federal taxes are filed, and you tell them about the name change. For a corporation, you use the name change box in your tax filing Form 1120 or 1120S. For a partnership, you can use the name change section of Form 1065.
Change the address of your business: To change your official business address with the IRS, fill out and send in Form 8822b. You can also use that form to change the designation of who’s responsible for the entity.