What IRS ID Do I Need for My Business?

In order to operate a business, the IRS requires either an Employer ID Number (EIN)(also known as a federal tax identification number) or a taxpayer identification number (generally a social security number).

The IRS has six questions to determine whether an EIN is required. If any of the questions are answered in the affirmative, a business must have an EIN. A business, such as a sole proprietorship with no employees, about which none of the questions are thus answered, may have an EIN.

The six questions are as follows:

Do you have employees?

Do you operate your business as a corporation or a partnership?

Do you file any of the following tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?

Do you withhold taxes on income, other than wages, paid to a non-resident alien?

Do you have a Keogh plan?

Are you involved with any of the following types of organizations: trusts, except certain grantor-owned revocable trusts, IRAs, and Exempt Organization Business Income Tax Returns; estates; real estate mortgage investment conduits; non-profit organizations; farmers' cooperatives, or plan administrators.

You may use your social security number to operate your business if you didn't answer "yes" to any of the six questions above. Nevertheless, you might want to consider obtaining an EIN so that you don't have to use your social security number as your taxpayer identification number due to privacy concerns.

It is very easy to apply for an EIN for your business by completing IRS Form SS-4. The form and instructions are available at the IRS Web site.

You can apply for an EIN online, by telephone, by fax, or by mail, depending upon how quickly your business needs that number. If you apply online, you can receive your EIN by Internet and use it immediately. Go to the IRS Web site, then click on Employer ID Numbers under topics.