When Do I Need a New Tax ID (EIN)? When Do I NOT Need a New EIN?
The tax identifier for a business is termed an Employer ID Number (EIN) by the Internal Revenue Service. Almost all businesses must have an employer ID for the business. If your business has employees, you must have an EIN, to be used in all transactions with the IRS, for paying payroll taxes and for filing payroll tax reports.
If your business doesn't have employees, there are almost always other circumstances in which you need an EIN. For example, many banks require businesses to have an EIN in order for loans to be processed, or even for setting up a business bank account. A sole proprietor business without employees may be able to operate without an EIN, but that's about the only circumstance in which an EIN is not needed by a business.
When You Must Get a New EIN
If you make changes to your business, you may need to get a new EIN. Some common business events that require a new EIN:
- If your business is subject to a bankruptcy proceeding
- If you change your type of business entity; for example, if you change from a sole proprietorship to a corporation. If a sole proprietorship takes in partners and begins to operate as a partnership, it must obtain a new EIN.
- If you buy a business that has been owned by someone else or if your business merges with another business.
- If you end an old partnership and begin a new one.
- If you (as a sole proprietor) purchase a new business, if your corporation becomes a subsidiary of another corporation, or if your partnership is taken over by one of the partners and operated as a sole proprietorship.
For more complete information on all the circumstances requiring a new EIN, see the IRS website for a listing.
When NOT to Apply for a New EIN
The IRS says you should NOT apply for a new EIN if:
- You change only the name of your business
- A partnership or corporation declares bankruptcy
- A corporation chooses to be taxed as an S corporation
- You elected on Form 8832 Entity Classification Election, to change the way the entity is taxed, or
- You change the location or add locations (use Form 8822 - Change of Address)
- You elect to be taxed as an S corporation.
Applying for a New Employer ID Number
You may apply for a new EIN in one of several ways, through the Internal Revenue Service. The easiest and quickest way to apply for an EIN is online, by using the IRS question and answer method. You may also apply by phone, by fax, or by mail.
Here are more details about how to apply for an employer ID number.