Getting Started with Federal Tax ID
When establishing a business, one of the first things you’ll have to consider is getting a federal tax ID4 min read
When establishing a business, one of the first things you’ll have to consider is getting a federal tax ID. This process of obtaining a federal tax ID comes with a set of complex paperwork and legal details that can be daunting, especially for new business owners in New York. Luckily, working with experienced automation professionals and business lawyers can alleviate part of this burden.
A federal tax ID, often referred to as an Employer Identification Number (EIN) can be used by businesses to identify themselves to the Internal Revenue Service (IRS). In most cases, an EIN is required for businesses to submit taxes, hire employees, and open certain types of bank accounts.
In New York State, employers must also apply for a New York State Tax ID and, in certain cases, a City of New York Tax ID to be eligible for payroll according to the state and city law. While the federal tax ID is often managed through the IRS, when it comes to New York-based businesses, obtaining a tax ID also involves researching local regulations in order to be compliant.
In this article, we will cover everything you need to know about getting started with federal tax ID. We will touch on the general process of obtaining a federal tax ID, explain why it’s important, and offer insight into New York-specific regulations. Finally, we’ll discuss how working with an experienced automation expert and legal team can make the process much simpler.
What Is a Federal Tax ID and Why Is It Important?
At its core, a federal tax ID is a nine-digit number assigned to a business by the IRS. It helps the IRS identify a business for official paperwork such as opening a business bank account, submitting taxes, applying for permits, and more.
For most businesses, obtaining an EIN is a necessary step in the process of filing taxes. Any business (even startups) with employees is legally required to obtain an EIN prior to submitting taxes, opening a bank account, or hiring employees. Also, solo entrepreneurs without employees may need to obtain a federal tax ID for certain types of businesses, such as corporations or partnerships.
The Basics of Obtaining a Federal Tax ID
The process of obtaining a federal tax ID begins by filing an application with the IRS. This application is typically completed online, although in some cases you can call the IRS at (800) 829-4933 to obtain an application. Depending on the legal structuring of the business, the application can be completed by the individual or a third party.
After the application is filed and submitted, you will need to submit additional forms such as an IRS Form 8822-B for any changes in ownership or structure, a W-9 for newly hired subcontractors, and more.
Regulations Specifically for New York-based Businesses
When it comes to filing taxes in New York State, business owners must obtain a New York State Tax ID in addition to a federal tax ID. Additionally, businesses located in New York City must obtain a City of New York Tax ID. Both of these IDs are assigned by the New York State Department of Revenue & Taxation and must be applied for separately from the federal tax ID.
When it comes to hiring employees in the state of New York, there are certain requirements that must be met in order to remain compliant with state and local law. Companies hiring employees in New York State must provide the employee with a W-9 form, have the employee fill out paperwork to request direct deposit, establish payroll deductions and have the employee submit a New York state tax withholding form (IT-2104).
Working With an Automation Expert and Legal Team
Obtaining a federal tax ID, along with any additional tax IDs and filing requirements for the state of New York, can be a complicated process. Working with an experienced automation expert and legal team can help make the process much easier by simplifying the process and saving you time. An experienced automation expert can help you setup your payroll, manage paperwork, and ensure you stay compliant with all IRS and state regulations.
Although large businesses may have internal teams of legal professionals who manage the payroll and taxes, many businesses may find it helpful to seek legal counsel from outside lawyers to get started on understanding and managing taxes in New York. With UpCounsel, you can find a network of experienced attorneys in the state of New York to ensure that your business remains compliant. From small businesses to the Fortune 1000, UpCounsel’s network of attorneys have the skillset and is dedicated to providing high-quality, cost-effective legal services.
Getting started with a federal tax ID is an important part of the process of setting up a business. Furthermore, navigating filing taxes in the state of New York requires a sound knowledge of local regulations. Working with an experienced automation expert and legal team can help you successfully get started and remain compliant.
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