A Federal Tax ID number is assigned to businesses by the U.S. Internal Revenue Service. This is a nine digit number used to identify your company to several federal agencies that will regulate your business. This is required for all businesses operating within the U.S.
Many terms are used interchangeably, and can cause confusion.
A Tax Identification Number or TIN is used by the IRS to differentiate the numbers it uses for tax purpose.
Numbers used for Identification are:
All businesses, excluding Sole Proprietorships are required to obtain a Federal Tax ID number. This is one of the key pieces of documentation that nearly every business is required to have in order to stay in good standing with the regulating bodies. The Federal Tax ID will be used frequently when completing important business documents so it is important to have it as well as to keep it safe.
Sole proprietors may used their social security number to report tax for the business. Business taxes will be filed with a personal tax return. It is important for sole proprietorship business owners to keep their social security number secure as this will be responsible for their personal tax return as well as connected with their business taxes.
Businesses that fall under this categorization of entities will use the EIN even if no employees are listed.
There is an exception to this rule. A single member LLC will use the Social Security number of the owner, NOT the Tax ID/EIN. This can be tricky for business owner to navigate without the guidance of a Federal Tax ID professional.
It is highly advisable that even tax-exempt organizations file for a Tax ID number. Regardless of whether the institution has employees, there may be circumstances when the EIN is needed. It can be beneficial for non-profit organizations to seek a personalized recommendation on whether or not they should file for a Federal Tax ID number.
Yes. A Federal Tax ID is solely for Federal reporting. A State Tax ID will still be required to satisfy your state tax reporting. Your business will need state ID’s for any state that the company has offices or employee. This might mean that a single business has several state ID’s.
Only one Federal Tax ID will be needed.
There is no fee to apply for a Federal Tax ID, however you may be required to pay for entity classification at the time of application. This can vary depending on when the business registers for a Federal Tax ID as well as the kind of business that is registering.
No. This number is unique to a single business. Even if a business requests a change, the number will not be re-assigned to a new business. Once a Federal Tax ID is register with a business it doesn’t have to be renewed and it works solely for that business.
If you are in need of a Tax ID number, fill out the IRS form SS-4 by clicking here. We do recommend speaking with a Cary CPA prior to submitting your form. It is best to make sure that your documentation is recorded properly from the start. If a change is needed, it could take weeks before the change is accepted.
Although the application form can be found online, it is best to consult with a qualified accounting professional to help in the process. If you are unsure of the business entity classification for your business, then the accountant at C.E. Thorn, CPA, PLLC can help you.