Applying for a Tax ID Number for Your New Business
Applying for a Business Tax ID using SS-4 Form
Applying for an EIN using the SS-4 Form
Most small businesses will need a Tax ID/Employer ID Number (EIN). Although this form is used for identification of employers, it required for other legal purposes, and you will most likely be required to supply it for a bank account and other applications. For the purpose of this article, assume that you are starting a small business. We'll talk about the different options for filling out the form, depending upon your legal entity type.
When you have completed the form, you will be ready to apply online or by phone, because all the information will be there for you to use.
Completing the EIN - Step by Step
Time Required: Time for completion and online filing: Under 1 Hour
- First, a disclaimer: This "how to" is intended to provide a general discussion for new business owners. It is not intended to provide legal or tax advice. Each situation is different and your tax adviser may require you to complete this form to comply with this specific situation. Please consult with your attorney or CPA to make sure you are in compliance with the tax laws and that you receive the best tax advantage for your specific situation.
For more detailed instructions, go to the SS-4 instructions on the IRS website.
Fill in the information about the business name and address
Legal name of entity - This is the business name that every transaction and record will be linked to, so be sure it is absolutely correct.
For Item 2 "Trade Name of the business," you can repeat the name or Use the "dba"/"fictitious name" you are operating the business as. For example, the Legal name might be Smith and Smith, LLC, but the operating name might be "Smith Accounting Services," the name on your signs and other items customers would see.
In item 3, list the person in charge of legal matters; the IRS calls this person the "responsible party." They want you to identify “principal officer, general partner, grantor, owner, or trustor." This most often is the same as the person listed in 7a and the Registered Agent for an LLC or corporation. Include the social security number, ITIN, or EIN of this person or entity.
Read more about the difference between a "nominee" and a "responsible party" if you are not sure who to designate for this item.
Items 8 and 9 are important if you setting up an LLC. If you answer "yes" to Item 8a, you must provide information in 8b and 8c. In item 9a, designate your "Type of Entity" for an LLC:
If you want to be taxed as a sole proprietor, choose "Other" and write "Disregarded Entity - Sole Prop."
If you and a spouse are in business together, here is what the IRS says:
"If the LLC is owned solely by a husband and wife in a community property state and the husband and wife choose to treat the entity as a disregarded entity, enter “1” on line 8b."
If you want your limited liability company to be taxed as a corporation, you must elect this option separately on IRS Form 8832.
If you want your multiple-member LLC to be taxed as a partnership, check "Partnership" under Item 9a.
If you are not sure how you want your LLC to be taxed, check with your CPA for more information.
If you are a corporation, use 9b to designate the state or country where you are incorporated.
In Item 10, check "Started a new business" and provide a very brief description of your business. You don't need to go into a lot of detail; a few words will do.
For Item 11, "Date Business Started" you can choose any reasonable date, such as the date you actually opened your doors and began serving customers. The start date is important if you are starting around the end of your fiscal year. Check with your CPA about the tax implications of startup dates.
For Item 12, select your fiscal (financial) year by designating the closing month. For businesses operating as a sole proprietorship, this would be December 31. There may be other reasons for choosing a different date. Check with your CPA for tax implications of this date.
Item 13 asks you to select a number of employees expected in the first 12 months. Unless you are running a farm or are hiring household help, you would put the number under "Other."
For Item 14, consider whether you will have less than $1000 in employment tax liability (for Social Security/Medicare, withholding, and unemployment). Unless you will have no employees, or you will be paying less than $4000 in wages to all employees within the year, mark "no."
For Item 15, if you will have employees, enter the estimated date of your first payroll.
For Item 16, enter the business classification that best fits your type of business, or enter "Other" and specify.
For Item 17, provide more information on the type/s of products or services you will be selling or providing.
For Item 18, indicate if the business (under the legal name in Item 1) has ever applied for or received an EIN previously.
Note that you may include the name and address of a "third party designee" to receive your EIN and represent you. You may want your attorney to perform this function.
Finally, sign the form, noting that you declare the application to be "true, correct, and complete."
Tips for Completing the Employer ID Number Application:
- Determine how you will apply: online, by phone, by mail, or by FAX. Read "How to Apply for an EIN" for more information on the process involved with each of these application processes.
- No matter which way you decide to apply before you start your application, print out Form SS-4 and fill it in completely. This will save time and frustration when you are online or talking to the IRS on the phone. You will not be allowed to leave any sections blank, so you must be sure you have all the information and you must know how you want to answer each question.
- When you have completed the form - online or by phone - you will immediately receive your EIN. Print out the page or write it down. You will need it for lots of documents during startup. You will receive a confirmation by mail, which you should keep in a safe place.
- If you are not sure you need an EIN, take a look at this article describing the circumstances when you need an EIN. You might also want to ask your CPA or attorney. When it doubt, get the EIN.
What You Need to Apply for an Employer ID Number
- Your business legal name, DBA/Fictitious Name, and Address
- What legal business entity you will be forming (corporation, partnership, sole proprietorship, LLC)
- Whether you will have employees the first year, and approximately how many.