What to Know About a Federal ID Number
With so much information to manage and keep track of, business owners often find themselves lost in a sea of information3 min read
With so much information to manage and keep track of, business owners often find themselves lost in a sea of information. One of the most important documents any business should keep track of is a federal tax ID number, otherwise known as an Employer Identification Number (EIN). For New Yorkers, particularly those in and around the Greater New York City area, access to experienced legal counsel is key to getting important questions answered. Attorney network UpCounsel’s experienced lawyers have the answers for all frequently asked questions (FAQs) about federal ID numbers.
A federal ID number is a unique nine-digit identification code assigned by the Internal Revenue Service (IRS) to people or entities required to report to the federal government for tax purposes. A federal ID number is sometimes known as an Employer Identification Number (EIN) or Taxpayer Identification Number (TIN). It is required if you want to open a bank account, hire employees, or apply for credit. It is a legal identifier just like your Social Security Number (SSN) is.
Applying for a Federal Tax ID Number
Any business entity that is legally recognized by the IRS as a taxable entity may be required to obtain an EIN, even if it has no employees. Depending on the type of business, a Sole Proprietorship, LLC or corporation would apply for an EIN. You can easily apply for an EIN online on the IRS website, or on UpCounsel.
Who Needs a Federal Tax ID Number?
Any individual, estate, trust, partnership, corporation, LLC, Club, association, church, government organization or city that is legally recognized as an entity by the IRS is required to have a federal tax ID number. If you’re a New Yorker who fits into any of these categories, you need an EIN.
What Documents Do I Need to Apply for a Federal ID Number?
Regardless of the type of business entity, filing for a federal tax ID number requires completion of a Form SS-4. You have to provide your name, address, and the primary contact person in your organization or company. You also need to specify the legal structure of your business (sole proprietorship, LLC, partnership, etc.).
If you’re a sole proprietor, you may not need to submit additional documents depending on your type of business. However, if you’re filing as a corporation or LLC, you may need to submit more information to the IRS, such as a copy of the Articles of Organization or Corporate Bylaws.
Common Reasons to File for a Federal Tax ID Number
Here are some of the most common reasons to obtain a federal tax ID number.
• Establishing a business entity — particularly if you are forming a sole proprietorship, LLC, or corporation
• Employing workers — you must have an EIN if you have employees
• Opening a business bank account
• Applying for certain licenses
• Establishing credit — applying for a EIN allows you to establish credit as a business
• Filing federal taxes
Using a Federal ID Number
Once you’ve obtained an EIN, use it for any business-related activities that require one. By properly displaying your EIN in documents such as invoices and tax forms, you can let others know that you’re a legitimate business.
It’s important to keep your EIN private. This is because the EIN is used for filing tax returns but also for many other activities. Fraudsters and identity thieves can use stolen EINs to open bank accounts, apply for credit, and commit tax fraud.
A federal tax ID number helps protect your business from fraudulent activities and opens you up to new applications and licenses as well as extends business credit. With experienced counsel from UpCounsel’s network of experienced attorneys, you can be sure that New York business owners will have all of their questions answered about their federal ID numbers.