How To: Get a federal tax ID number

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Photo by rawpixel.com on Unsplash

By Kirsten Adshead/motherbility

EDITOR’S NOTE: This article is part of motherbility’s Start-Up Kit for Start-Up Businesses. 

It’s not the sexiest of topics. But if you’re setting up a business, it’s one you need to consider:

Should you get a federal tax identification number? And, if yes, how?

Let’s start with “What is it?”

First off, “it” has a lot of different names: Federal Tax Identification Number, Employer Identification Number, Federal Employer Identification Number, business ID number.

They all refer to the same thing: a nine-digit number unique to your business that the Internal Revenue Service uses to track you. It’s essentially a Social Security Number for your business.

Getting a tax ID number is easy. And free. You can have one and be using it 15 minutes from now. Seriously.

But should you?

In some cases, the IRS requires it — if, for example, your business operates as a corporation or a partnership, you’re a non-profit organization or you have employees.

Even when it’s not required, however, obtaining a tax ID number can be a good idea.

As a business, at some point you’re probably going to have to give an ID number out to someone else. Without a tax ID number, you’ll have to use your personal Social Security Number.

The more you hand out your SSN, the more you’re at risk for identity theft.

One example of many: If you operate an in-home child-care business, parents may want to deduct their payments on their taxes. In that case, they’ll need an ID number for your business, so the IRS can track the legitimacy of their deduction. Without a tax ID number, you’ll be giving them your SSN.

Do you plan to set up a separate banking account for your business? (A motherbility article on that topic is coming soon.) Some banks require a tax ID number in order to open an account in your business’ name.

So, if you decide to get a tax ID number, how do you get one?

The IRS actually has made that simple. You can apply through the mail. Or you can just go here.

The online application is pretty straightforward.

You’ll need your Social Security Number or an equivalent, and it’s helpful to have your business’ official identifying documents on hand. (For example, if you’re applying as an LLC, have your Articles of Organization available to ensure that you give the IRS your exact LLC name.)

You’ll get your tax ID number immediately, and can start using it for things like opening up a banking account.

But the IRS notes that it can take up to two weeks before your tax ID number becomes part of the IRS’s permanent record. So you’ll have to wait for that to happen before filing an electronic return or making an electronic payment.

And … that’s it.

Fifteen minutes and you can be officially IRS official. Easy.

 

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