On your checklist of things to do when forming a business is obtaining an EIN or Federal Tax ID. What is it, and when can you start using it? Read on to find out the answers.
What is EIN?
EIN refers to the employer identification number on file with the IRS to use for taxes and other business activities. You receive this number by applying for one based on the type of business you have. As you might have guessed, the ID is a must-have if you want your business to operate legally.
An EIN is not just for companies, though. For example, you can also acquire an IRS estate tax ID if you are the legal representative of an estate.
No matter the purpose, you may be wondering how soon you can use your federal tax ID number after applying for it.
How quickly will you receive your EIN?
If you think that you’ll receive your EIN in weeks, think again; in today’s digital world, you can apply quickly and conveniently online. This means that it only takes minutes to complete the process.
You will get your number within hours of finishing the application, if not sooner. If you applied late at night, you may have to wait until the morning to receive your EIN.
Of course, you can take the conventional, allegedly much slower methods of applying, such as fax or mail. But it take days to weeks.
When can you start using your tax ID?
The good news is that you can start using your number right away for most business needs, including:
- Opening a financial account
- Applying for a credit card or loan
- Obtaining licenses and permits
- Hiring employees
- Mailing a paper tax return
However, because it takes two weeks for the IRS to add your EIN to its permanent records, some transactions are not available right away. For example, you can’t file your taxes online or make tax payments electronically until the IRS sends you official documentation, which can take up to a month.
Still, you can get started on the day-to-day responsibilities of running a company as soon you have your tax ID. How’s that for
How to get started
There are two ways to get started with the application process: Apply via the IRS’ website or a third-party service provider for quick results.
Due to the complexity of the process, it’s recommended to use a third-party service provider like IRS EIN Tax ID Filing Service. Contact the company if you are unsure which business entity to apply under.