One of the key components of filing for a business is obtaining your federal tax ID. Forming a corporation is not easy. There are several things you must do in order to have a legitimate corporate entity. This is especially important when it comes to filing taxes.
The process might seem intimidating at first, but in reality, it’s one of the easiest parts of the process. The last thing anyone wants to do is get in trouble with the Internal Revenue Service. There are three basic ways to obtain your federal tax ID so you can start your company the right way.
What Is a Federal Tax ID?
A federal tax ID, also known as employer identification number (EIN), gives the Internal Revenue Service a way to identify your business. You can think of it as the social security number of your corporation.
The tax ID is also used to report payroll taxes. However, you will need it even if you don’t plan to hire other employees. Most banks will require this number in order to open your business bank account. There are three ways to obtain a federal tax ID.
Call the IRS
The first, and probably most inconvenient way to obtain a tax ID for your business, is to call the IRS. Just follow the telephone prompts, and you will get in touch with an agent who will ask you a few questions. After that, the agent will give you your federal tax ID.
Use the IRS’ Online Tool
Using the IRS’ online tool is the easiest and quickest way to get an EIN for your company. You won’t have to worry about being on hold for an extended period of time, communication with machine prompts, or being disconnected. The tool can be found by going to irs.gov. You will need to fill out a short questionnaire. At the end, you will receive your federal tax ID.
In some cases, the IRS may require you to mail in a form to get your EIN. They typically conduct random audits of applicants, and these applicants will not be able to use the online tool to obtain their tax ID.
If this is the case, you will need to download the correct form from irs.gov, fill it out, and mail it to the Internal Revenue Service. Needless to say, this is not the most desirable option, especially if you need to quickly open a business bank account for your corporation.
In most cases, getting a federal tax ID for your business is simple and easy, and most importantly, free! Try starting out with the online tool, as that is the easiest option. Once you have your tax ID, you will be able to open your bank account and start receiving payments.