Requirements

• The IRS has clear requirements about what type of businesses must obtain a federal tax ID. If your business has employees, operates as a corporation or partnership (including an LLC), files employment, excise or alcohol, tobacco and firearms tax returns or withholds taxes on income, you must obtain a federal tax ID. In addition, if you have a Keogh retirement plan or are involved with trusts, estates, real estate mortgage investment conduits, non-profit organizations, farmers' cooperatives or plan administrators, you must obtain a federal tax ID.
  
  

Obtaining a New Federal Tax ID

• Depending on your business model, you might need to obtain a new tax ID if certain circumstances change, such as a change in the business model (sole proprietor to partnership) or the nature of a trust or estate changes. Typically, a business name change is not a reason to obtain a new tax ID.
  
  

Purpose

• A federal tax ID is needed for your business to pay payroll and other business taxes. When filing and depositing taxes, you must include your federal tax ID. Businesses that are not required to obtain a federal tax ID still should consider getting one, because without a tax ID, you might not be able to make wholesale purchases for your business or attend trade shows.
  
  

How to Apply

• You may apply for a federal tax ID online or by telephone, fax or mail. If you apply online or by telephone, you can obtain your ID immediately. The application asks for information such as the type of business model you operate (corporation, LLC, sole proprietor), the reason for the application (new business, hired employees, changed your business structure), the number or partners, personal information and the state in which you operate. If you elect to apply by mail, you will need to complete a Form SS-4, and the process takes about four weeks.
  
  

Electronic Federal Tax Payment System (EFTPS)

• After you have obtained a federal tax ID, enroll in the EFTPS online or by phone. Doing so will allow you to deposit all your business payroll taxes online. With the EFTPS, you can make deposits weekly, monthly or quarterly, which should help prevent you from incurring any late-payment penalties.