An employer identification number, also known as an EIN or federal tax identification number, is how the IRS identifies your business as an operating entity within the United States. Company owners use this nine-digit number to conduct activities that would otherwise need a social security number.
When Do You Need an EIN?
You will need to apply for EIN if:
-You have employees.
-You have a Keogh Plan.
-Your business operates as a partnership or corporation.
-You’re involved with certain types of organizations, such as estates, non-profits, or real estate mortgage companies.
How Do I Cancel My EIN?
If for some reason you need to cancel your employer identification number after it has been assigned, the IRS cannot do it for you. After an EIN is assigned to a company, it becomes the permanent federal taxpayer ID number for that business entity. The employer identification number will never be reassigned or reused.
Despite the fact that the Internal Revenue Service cannot cancel your EIN, it can close your business account. To achieve this, simply send the IRS a letter that includes the name of your company, the EIN, the business address, and why you wish to close the account. If you have a copy of the EIN Assignment Notice, which you got when you initially registered for EIN, include that as well.
After you have started your business, you will need to obtain a Federal Tax ID number. The federal tax ID number is permanent, and once it is created, it cannot be cancelled. Even if you do not create a federal tax return, an EIN will always be assigned to your business and never distributed to another company.
How to Close Your Business Account
To cancel an EIN, you will need to submit a letter that includes not only your EIN and business address, but also the reason you are closing your account. It is important when you are starting your business to save important pieces of paperwork. When you are closing your account, save the EIN assignment notice.
Taking care of your paperwork at tax time will set your business up for success. If you want to know how to cancel an EIN, make sure to file a tax return before you close your account. Make a checklist before you close your account, which will take the guesswork and hassle out of this process.
How an Exempt Organization can Close a Business Account
If you work for an exempt organization and have an EIN, you will need to submit a letter requesting to close your account. To submit the letter, you will need to meet the following conditions: never applied for a formal exemption, never filed a return, and your organization is not covered by a group ruling.
When you are sending your letter, you will need to state the reason you are closing your account. Make sure you know when your EIN was issued. When you submit the application, include the EIN, legal name of the entity, and your address.
Your federal tax ID will always be a part of your business. You may not be able to cancel the number, but you can have your account closed.