Everything You Need to Know About Federal Tax ID Numbers
Understanding Federal Tax ID Numbers When Running a Business in the US2 min read
When Opening a business in the US, it is important to understand the legal obligations and duties of running a business - and this extends to Federal Tax ID Numbers. Businesses across New York and the United States are expected to have a tax identification number which must be provided to the IRS for taxation purposes. In this article, we will explain what Federal Tax ID Numbers are, why they are important for businesses, and how to apply for a tax ID in New York.
What is a Federal Tax ID Number?
A Federal Tax ID Number, more formally known as an employer identification number or EIN, is a unique nine-digit number assigned to businesses for tax filing purposes. This nine digit number is issued by the IRS and stays with the company for the duration of its operations. It serves as a company’s social security or taxpayer identification number and is needed for tax purposes, banking, hiring employees, opening a business bank account, credit applications, and more.
Why Do I Need A Federal Tax ID Number?
When a business is legally recognized, there will be tax obligations the owner must abide by. This is where the need for a Federal Tax ID Number comes in. With a Federal Tax ID Number, the business owner does not have to use their social security number as the taxpayer identification number for the business. This prevents any other personal information from leaking to the public - something that is required if the business receives credit, generates revenue, or performs any other similar actions.
How To Apply For A Federal Tax ID Number
In New York, you can obtain an EIN by filing Form SS-4. This completed form must be submitted together with the appropriate fees and supporting documents. The most common forms of identification accepted are a driver's license, Social Security Number, or 'Passport'. Once you have submitted the Form SS-4, the IRS will issue you with an official EIN and your business will be registered.
It is important that the information provided on the Form SS-4 is accurate and matches the documentation provided as this will enable the issuing of the EIN to proceed quickly and without any complications. If the information is incorrect or does not match the supporting documents, the issuing of the EIN may be delayed.
Once you have received the EIN, you must remember to use it whenever you are filing any kind of tax paperwork. It is important that the paperwork is filed correctly and that the Federal Tax ID Number matches the one provided by the IRS. Doing so helps ensure that the IRS is always up to date with your business’ taxation requirements.
Final thoughts
Understanding your legal and taxation obligations is key when it comes to running a business. A Federal Tax ID Number is a key requirement for operating a business and must be obtained in order to remain in compliance with local laws. We have explored the various elements that are required in order to obtain a tax ID in New York, and the importance of filing the tax paperwork correctly and accurately.
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