Applying for federal tax ID is a must when starting a new business. Indeed, starting up is not only about turning your ideas into reality, but also about complying with the existing laws and regulations. For the said compliance requirements, a trust tax ID number is needed to be able to distinguish your business as well as assist with the filing of employee taxes as well as your own.
However, compliance is a challenging process. There are several criteria that the IRS has set with the EIN system, requiring business owners to obtain a number in order to conduct tax-related actions where a social security would otherwise be used.
EIN Number Filing Criteria
The IRS has created certain criteria showing what scenarios or factors require an EIN number.
If you have employees, an EIN number is required. The number is used for tax purposes. If you operate a business as a partnership or firm, you must have an EIN Number. If you file tax returns involving firearms, employment, tobacco, alcohol or excise, you are required to have an EIN number by the IRS.
Aside from businesses, if you are involved in a non-profit, farmers’ cooperative, IRA, trust, estate or plan administrator plan, you will need to have an EIN. Not only those, but you also must have this tax ID number if you have a Keogh plan.
A New EIN Number
If you have an existing EIN number due to business or other reasoning, you may be required to obtain a new tax ID number for varying reasons. One reason is that the ownership or the structure of the business changes. If you incorporate your company, then you will need a new tax ID number. When you become subject to bankruptcy reporting, you will need a new number. A new filing must also be completed if you inherit or receive a company that you operate under sole proprietorship.
There is an exception, though. If for some reason you decide to change the company name, own multiple companies or change the location of an owned business, you are not required to obtain a new EIN Number.
Knowing the process of tax ID numbers as well as situations when a new number is needed will help you to continue to run a successful and law-abiding business. Please consider consulting with your trusted advisors for more details on those numbers.