How to Apply for a Tax ID (EIN) Number Online
Businesses need employer identification numbers (EIN) for a broad range of purposes. When you have employees, you must include your EIN on employee-related tax forms such as the 941 (Employer’s Quarterly Federal Tax Return). You also put this number on forms generated for your employees such as the W-2 (Wage and Tax Statement).
Even if you don’t have employees, you may need an EIN to open a business bank account, apply for business loans, or file certain tax returns such as partnership or s-corp returns. Luckily, this critical number is relatively easy to obtain online. Wondering how to get an EIN online? Check out this guide. It gives you tips to work through the process.
1. Decide why you need an EIN.
When you apply for an EIN online, you have to note why your business is requesting an EIN. As indicated above, there are all kinds of different reasons. Here are the main options:
- Launching a new business — New businesses need EINs before they can open business bank accounts or hire employees.
- Taking over an existing business — EINS are linked to business owners. So if you buy an existing business, plan to get a new EIN.
- Hiring employees — While you can often get your business off the ground without an EIN, you will need one before you hire your first employee.
- Becoming compliant with IRS withholding regulations — Typically, you can pay 1099 contractors without an EIN, but if you have to do backup withholding, you need an EIN. For instance, this may come into play if someone doesn’t provide a W9 or if you hire a non-resident alien.
- Opening bank accounts or applying for loans — Often, businesses need EINs simply for banking purposes.
- Changing the type of organization — If you’re shifting from a sole proprietorship to a partnership or corporation, you need an EIN. You may also need an EIN to become an LLC or to change your business structure in any other way.
In rare cases, you may also need an EIN for another reason. To apply for an EIN online, you should be ready to write a short statement about why you need this number.
2. Gather basic details about your business.
An EIN acts as a unique identifier for your business. To ensure your EIN is linked to your business, you need to provide business details when you apply for the EIN online. Luckily, the details that you need are very straightforward. Most business owners can answer these questions off the top of their heads.
If you’re just starting a new business, however, you may still have to make decisions about some of these details. Review what you need before you start the online EIN application. Then, ensure you have the right information and that you’ve made decisions as needed.
In particular, you need the legal and trade name of your business. The legal name is the name that you file taxes under. If you’re a sole prop, the legal name is your own name. Then, the trade name is the name that you use on your signs and marketing materials.
Partnerships and corporations generally have the same legal and trade names. But there are exceptions to this rule.
Additionally, you need the address and phone number of your business. You also need to note a responsible party along with their tax identification number. Beyond that, you need to know the date you started or acquired the business. You also need to know your main product or service.
3. Determine your business structure.
You need to note your business structure when you apply for an EIN online. While this is an easy question for some business owners, it’s more complicated for others. Here are the main business structures followed by an explanation.
- Sole proprietorship — You own your own business and report your profits and loss on a Schedule C with your individual income tax return.
- Partnership — You own the business with one or more partners. You file an informational partnership return. Then, you report the profits and pay tax on your individual income tax return.
- Corporation — The business is its own entity. It files its own tax return. Then, if it’s an s-corp, the profits flow to the owner’s individual tax returns, and the individual owners pay tax on their portions. If the business is a c-corp, the business pays taxes when it files the c-corp return.
If your business is a corporation, you also need to note when it was incorporated. Finally, you need to note if the business is an LLC. If so, you need to know the number of members.
Note that there are a few other structures that you can choose from when you apply for an EIN online. They include personal services corporations, non-profits, estates, churches, trusts, military/national guard, farmers’ cooperative, REMIC, state/local government, or Indian/tribal government.
4. Estimate how many employees you plan to hire.
If you apply for an EIN online, you also have to share information about your employees. Think about your needs for the next 12 months. Then, estimate how many employees you will need during that time.
Keep in mind that when you apply for an EIN online, you also need to note how many of your employees are in the agricultural or household categories. Most businesses note their total number of employees in the other category.
5. Decide if you qualify to file payroll tax forms annually.
Most employers need to file employee payroll returns quarterly, but a few qualify to file these returns annually. When you apply for an EIN online, you can opt for annual reporting. But you only have this option if you pay out less than $1,000 in payroll taxes.
Before you start the online EIN application, estimate how much you expect your employment tax liability to be. If you expect it to be less than $1,000, you can opt to file Form 944 once a year. This generally only applies if you pay your employees less than $5,000 during the year. If you don’t use your online EIN application to opt into annual filing, you must file quarterly even if you would have qualified to file annually.
An EIN is essential for most businesses. Luckily, the online application process is pretty straightforward. If you’ve worked through the above tips, you’re ready to apply for an EIN online.