You probably already know what a Social Security number (SSN) is. This unique nine-digit number is used to identify you on tax filings and other important government business documents. An employer identification number (EIN) follows a similar concept — but it’s for businesses, not individuals.
Also called a business tax ID number, your EIN is a one-of-a-kind numeric code that allows the Internal Revenue Service (IRS) to identify your business. You have to include an EIN on all tax documents and related forms. If you are a small business owner, it’s important to understand when you need an EIN and how to use one.
The great news is that the IRS makes it super simple for business owners to obtain an EIN. The process is fast, easy, and, best of all, free. You can complete this task in less than 30 minutes, and it won’t cost you a thing.
This guide gives you all the information you need on getting a business tax ID.
1. Determine Your EIN Eligibility
You are allowed to apply for an EIN if your principal place of business is located in the United States or any of the U.S. territories (such as Puerto Rico, the U.S. Virgin Islands, or Guam). To apply for an employer identification number, you must have a valid taxpayer identification number, such as an SSN, EIN, or individual taxpayer ID number (ITIN).
Before you rush ahead to get your employee identification number, confirm whether you need a business tax ID. You need to apply for a federal tax identification number (another term for EIN or business tax ID) so that your business can pay state and federal taxes. Further, you should get an EIN if you meet any of the following criteria:
- You have a business that pays employees.
- You have a business that operates as a partnership or corporate business structure.
- You have a business that withholds taxes on income (aside from wages) paid to a non-resident alien.
- You have a business that files tax returns for employment, alcohol, firearms, tobacco, or excise (a special tax paid on specified products, like gasoline).
- You have a business that uses a Keogh plan, a type of tax-deferred pension plan available to unincorporated businesses and self-employed individuals.
- Your business works with specific types of organizations, including nonprofit organizations, farmers’ cooperatives, real estate mortgage investment conduits, estates, and certain types of trusts.
Practical Benefits of an EIN
Regulatory obligations aside, an EIN also has practical benefits. Even if you aren’t legally required to get an EIN (for example, you run a sole proprietorship with no employees), it’s still helpful to get one.
Say you want to open a business bank account for your plumbing business, for example. This allows you to separate your business deposits and spending from your personal banking. Delineating professional finances from personal finances is important because it protects your personal assets in case of liability issues related to your business.
This also allows for more efficient and accurate bookkeeping, creates a clear financial paper trail for the IRS if you are ever audited, and makes for more professional-looking business operations overall.
2. Fill Out the IRS Application
The fastest way to get an EIN is via the online application. All you have to do is click "Begin Application," complete the requisite steps, and you will get your EIN immediately. Note that you must complete the process in a single session. You can’t save your information and come back later to complete the process.
If you remain inactive for 15 minutes, your session will expire, and you’ll have to start over. For this reason, it’s smart to set aside sufficient time and any paperwork you’ll need to complete the process in advance.
If you don’t want to complete the application online, you can apply via phone, fax, or mail. In this case, you should refer to Form SS-4, Application for Employer Identification Number.
Here is the information you will be asked to provide:
- Your name and address
- The county and state where your business is located
- Your SSN, ITIN, or EIN
- The type of business entity (for example, sole proprietor, partnership, or corporation)
- The date your business was started or acquired
- If you are applying for an EIN for a limited liability company (LLC), you’ll specify this and provide the names of the LLC’s members.
- If you are applying for an EIN for a corporation, you’ll designate the state or foreign country where the corporation was incorporated.
- Your reason for applying (You’ll be given a list of options, including "hired employees," "started a new business," and "banking purposes.")
- The closing month of your business accounting year
- The highest number of employees you expect to hire in the next 12 months (You can input zero if it’s none.)
- The type of business activity you conduct (You’ll be given a list of options, including construction, manufacturing, health care, and more. Just pick the one that fits most closely if your industry isn’t listed.)
- If you’ve applied for an EIN previously, you’ll have to indicate this and provide your previous EIN for reference.
- Finally, you can designate a third party to receive your business entity’s EIN and answer questions about the contents of the form. You might choose this if you have a business lawyer advising you, for example.
3. Submit the Application
If you complete the EIN application online, the IRS.gov EIN Assistant webpage will walk you through the process. When you’re done inputting the necessary information, the IRS website will immediately generate a new EIN number for you. You can start using your EIN right away.
Here’s how to submit your application if you want to complete the process via phone, fax, or mail:
Telephone (International Applicants Only)
The phone application is possible only for international applicants (meaning you have no legal residence, principal office or agency, or principal place of business in the U.S., and no U.S. possessions). You can call 267-941-1099 from 6 a.m. to 11 p.m. Eastern Standard Time, Monday through Friday. Note that this is not a toll-free number. The IRS recommends having completed Form SS-4 beforehand to expedite the process.
Mail or Fax (Domestic)
If you have an office or agency, principal place of business, or legal residence (in the case of individuals) in a U.S. state or Washington, D.C., you can mail Form SS-4 to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Alternatively, you can fax Form SS-4 to 855-641-6935.
Mail or Fax (International)
If you have no office or agency, principal place of business, or legal residence (in the case of individuals) in any U.S. state or Washington, D.C., you can mail Form SS-4 to:
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Alternatively, you can fax Form SS-4 to 855-215-1627 (within the U.S.) or 304-707-9471 (outside the U.S.).
4. Save the Document With Your EIN
You will receive an official document from the IRS confirming that your application was successful and providing you with a record of your federal employer identification number. Save one copy of this document and print another copy for your records.
You will need to know your EIN and be able to look it up when you file income taxes or hire employees. You may also need to present this paperwork to third parties in the future. For example, the bank will ask to see it when you open your business bank account.
How Much Does It Cost to Get a Tax ID Number for a Business?
The IRS will provide your EIN number for free. While you can pay incorporation services to take care of the EIN application for you, this isn’t necessary. All you have to do to get a business tax identification is to follow the steps above. There is no filing fee.
Do You Have to Have a Business License to Get a Tax ID Number?
You don’t need to provide a business license for the IRS to issue your business tax ID number. However, in some jurisdictions, you may have to present your EIN to get a business license. Since getting an EIN is fairly fast and simple, it’s probably best to go ahead and get this out of the way before researching what type of business licenses you need.
Manage Your Tax Forms and Accounting With Skynova
With this guide, you have the essential information on how to get a business tax ID. As you can see, the process is pretty straightforward. Just make sure to keep your EIN paperwork in a secure place once you receive it.
Setting aside a folder with your tax documents when you first start your business is a smart move. When tax season comes around, having all of this information at your fingertips will make filing faster and simpler.
Skynova helps entrepreneurs manage their finances with business templates, like free purchase orders, quotes, and even invoices. The Skynova software products can further help streamline your processes, including accounting software made with your small business in mind.