The IRS EIN application: understand when a new EIN number is required

A pen sits on a ss 4 form, the IRS EIN application

An Employer Identification Number (EIN) is one tool that may help keep your small business and personal records separate. An EIN is a tax ID number that is the business equivalent of a social security number. It is used on your small business tax return, on financial documents, and to open business bank accounts.

Completing the IRS EIN application is a milestone in many small business owners’ journeys. But did you know it may happen more than once? It’s true. As your business matures, it may be necessary to apply for an EIN number again.

But when is it necessary to obtain a new Employer Identification Number for your business? The experts at Block Advisors are here to help you determine when an IRS EIN is necessary for your business, how to apply for this federal tax ID, and reasons to submit a new IRS EIN application.

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Reasons to get an IRS EIN

Not all businesses are required to have an EIN number.  Many business owners choose to go through the EIN application process to get this specialized tax ID number to help keep their small business records and personal records separate.  In some cases, it’s required.

Some common reasons businesses are required to get a EIN – a business tax ID – include having employees, operating a business as a corporation (including S Corp) or a partnership, and having a qualified retirement plan (learn more about tax-advantaged retirement accounts).  Other situations may also require the business to have an IRS EIN tax ID number.

Understand when a new tax ID is needed

Sometimes, your business may need to obtain a new federal tax ID number by submitting another IRS EIN application. Knowing when to get one for a small business can help avoid headaches down the road. 

If you are a sole proprietorship or single-member LLC, you need to apply for a new business tax ID when the business:

  • Takes on a partner
  • Incorporates
  • Forms an LLC and elects to be taxed as an S Corp
  • Establishes a retirement plan
  • Files for bankruptcy

You do not need to apply for a new federal tax ID number when your sole proprietorship or single-member LLC:

  • Changes its business name
  • Changes or adds business locations
  • Chooses to operate multiple businesses using the same EIN

To update your tax ID information, use Form 8822-B. Learn more about IRS Form 8822-B by checking out The Ultimate List of Small Business Tax Forms.  

Partnerships and corporations adhere to a different set of guidelines, so be sure to take your business structure into account when you decide whether or not to apply for a new federal tax ID.

Apply for an EIN for your small business

Small business owners can apply for EIN directly through the IRS EIN application online, by fax, by mail, or by phone.  You will be asked to complete an IRS SS-4 Form, Application for Employer Identification Number. It’s important to note that you can only apply for one EIN tax ID per day. See our article, How to get an Employer Identification Number (EIN), for more information on the process of securing a small business tax ID number.

Block Advisors is here to help

While the IRS EIN online application for businesses using the SS-4 Form is fairly accessible, don’t worry if you’re feeling unsure. A Block Advisors Certified Tax Pro can assist you in completing and submitting IRS Form SS-4. 

Schedule a consultation with a Block Advisors Certified Tax Pro for help.

If you are considering forming a new business entity, Block Advisors Business Formation is one choice to ensure all of your paperwork, such as your EIN application, is completed properly. Business formation packages include an IRS EIN application at no extra charge. Getting started takes just 10 minutes.

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