Assistance Obtaining a Federal Tax ID for Small Businesses in Raleigh

What is a Federal Tax ID?

A nine digit employer identification number assigned by the United States Internal Revenue Service to business entities conducting business operations within the country. The number identifies your business to a variety of federal agencies tasked with the regulation of business.

Is There a Difference Between a Federal Tax ID and EIN?

The definitions can be tricky, but there are a few terms that are commonly interchanged for one another.

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:

  • A Social Security Number (SSN)
  • Employer ID number (EIN) – businesses that register with the IRS most commonly use an EIN for identification
  • Individual Taxpayer ID Number (ITIN) – for individuals who are NOT eligible for Social Security numbers. Not to be used for identification.

Who Needs a Federal Tax ID?

Any business except a sole proprietor that offers services or products that have any form of tax placed on them, then the business must acquire a Federal Tax ID number. If a business pays state taxes on personal services or pays state sales tax, then a Federal ID number is required. Typically if a business has employees and pays any taxes, it must be registered with a Federal ID.

Do I Need a Federal Tax ID for a Sole Proprietorship?

A sole proprietor can provide their SSN number as the tax number for the business. No other number is required since the business owner files and pays taxes with their personal tax return.

LLC’S, Partnerships and Corporations

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.

Do I need Tax ID for Church/non-profit Organization?

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.

Is State Tax ID and Federal the Same?

No. A state tax ID is solely for state tax reporting. Any state that a business may have offices or employees will have to pay the state taxes there. It is feasible that a business could have multiple state tax ID’s, thus making it a difficult identifier. Only one federal ID will be issued and it supersedes that of the state.

Do You Have to Pay for a Federal Tax ID?

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.

Does a Federal Tax ID Expire?

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.

Applying for a Federal Tax ID

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 Raleigh 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.

Speak with an Experienced Small Business Accountant in Raleigh

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 experienced Raleigh accountants at C.E. Thorn, CPA, PLLC can help you.

Contact our team today by completing the online contact form or by calling 919-420-0092. Find out why local businesses have entrusted us with their local accounting needs for over 26 years!

2020 financial tax deadlines