Does your business have a Tax ID Number yet? If it doesn’t, you’re going to need to apply for one before you start hiring employees, getting loans, or filing your tax payments. A Tax ID Number is one of the most critical components of establishing your business – and it should be acquired as soon as possible.
Things to know about Tax ID Numbers
- What Is a Tax ID (EIN) Number?
- How Do You Find Your Tax ID Number?
- What Is a Tax ID Number Example?
- How Do You Get a Tax ID Number?
- What Is the Difference Between an EIN and a Tax ID Number?
A Tax ID Number can refer to either a Federal Tax ID Number or a State Tax ID Number. When referencing a Federal Tax ID Number, a Tax ID Number is the same as an Employer Identification Number (EIN) or Federal Employer Identification Number (FEIN). A Tax ID Number is used to identify an organization to the federal government for the purposes of tax payments, licenses, fees, permits, and more.
A Tax ID Number is one of the first things that a business should acquire, as without one, a business usually won’t be able to open a business account, get a business loan, or get a business line of credit. Like a Social Security Number (SSN), a Tax ID Number is also used by banks and creditors in order to track and identify a business. Businesses are able to establish their credit history through a Tax ID Number.
Further, a Tax ID Number is also used to hire employees. When used to hire employees, a Tax ID Number is usually called an “Employer Identification Number” or a “Federal Employer Identification Number.” This Tax ID Number will be used on official hiring documents, to pay for payroll taxes, and for things such as applying for visas for employees who need them.
Without a Federal Tax ID Number, a business will usually not be able to apply for permits or licenses as needed, such as food service licenses. Federal Tax ID Numbers may also be used for other incidental things, such as for identifying a business to wholesalers and vendors, and ensuring that the business can acquire tax advantages when purchasing goods.
A Federal Tax ID Number is not the same as an Individual Tax ID Number.
If you haven’t already applied for a Tax ID Number, then you don’t have a Tax ID Number. A Tax ID Number is acquired through a short application process, which will take in some basic information about your business and then give you a unique identification number that will then be used as your Tax ID (EIN). You can apply online and obtain a tax ID within an hour. While you can also apply through the mail, that can take up to six weeks – during which time your business won’t be able to perform many important tasks, such as hiring employees.
If your company already had a Tax ID Number and you just need to find it, you should be able to locate it on some of your company’s forms. Your Tax ID Number may be on your company’s credit report, payroll files, and other documentation. If you cannot find it in any of your documents, you may be able to look it up through a paid EIN database service.
All Tax ID Numbers contain a total of nine digits, rather than the eight digits of an SSN – this makes them easy to distinguish from each other. Your Tax ID Number will be in the format of XX-XXXXXXX, much as a Social Security number comes in the format of XXX-XX-XXX. This makes it easy to identify a Tax ID Number on many forms.
To get a Tax ID Number, you will first need to make sure that you’re eligible for one. Only someone who has a Taxpayer Identification Number (such as an SSN or an ITIN) is allowed to apply for a Federal Tax ID or Federal Employer Identification Number (FEIN). Further, the business itself needs to be located inside of the United States.
You can apply for a Tax ID Number in three ways:
- Mail. Mail will take up to six weeks to return a Tax ID Number. This will require that a paper form be sent by mail – and if there are any complications with the form, it may take longer.
- Fax. Applications can be faxed in for a Tax ID Number. The EIN will need to be received via fax as well and can come in at any time within four business days. This can make it difficult to acquire.
- Online. Through the internet, a Tax ID Number can be acquired within an hour. This is the easiest and fastest way to acquire a Tax ID Number.
Once you get a Tax ID Number, the number can be used immediately.
An EIN generally refers to a Federal Employer Identification Number. A Tax ID Number may refer to a Federal Tax ID, a State Tax ID, or an Individual Tax ID. Consequently, while an EIN and a Tax ID Number may be referencing the same thing, it also may not; further clarification may be necessary.
When a Tax ID Number refers to a Federal Tax ID, then a Tax ID is identical to an EIN: A company’s EIN is always going to be the same as their Federal Tax ID.
Getting a Tax ID Number doesn’t have to be a complicated process. You can apply for one online today and receive it within an hour. Filing for a Tax ID Number as soon as possible is ideal, as many businesses are not able to operate without one.