There are many different reasons that you may need to cancel your EIN. Perhaps, you’re closing your business or changing the structure of your business from a sole proprietorship to a corporation or a partnership. Maybe, you applied for an EIN and then realized you don’t actually need it.
Regardless of why you want to cancel this number, this guide is designed for you. It explains how these numbers work, how to change your EIN, and how to cancel EIN number.
Note that you must cancel an EIN if you no longer want to use it. These numbers never expire, and they can’t be reused or reassigned. Your number will continue to exist until you actively cancel it. If you don’t want this number floating around and potentially putting you at risk of business identity theft, you should cancel it. Here’s an overview of the process.
How to Change Your Employer ID Number
In some cases, you may want to cancel your EIN so that you can get a new number. Unfortunately, you can’t just reach out to the government and ask for a different EIN. Instead, you will need to cancel the existing EIN and then, apply for a new EIN.
This often happens when you buy a business with an existing EIN. As a new owner, you will need a different EIN. This can also apply in situations where you are changing the structure of your business, and you want a new EIN.
With both of these scenarios, you should follow the steps outlined below to cancel the EIN. If you’re buying an existing business, then, the former owner should follow these steps to cancel the EIN. Then, you can apply for a new EIN. When you apply for the EIN, you can tick a box that says you want a new one because you purchased an existing business or changed your business structure.
File Taxes Before Canceling
The IRS cannot cancel an EIN if you have outstanding tax returns or payments. Before canceling your number, you will need to file federal tax returns and make any payments that are outstanding.
To give you an example, let’s say that you dissolve your partnership in May 2022, but you still need to file a partnership tax return. The return isn’t due until March 15, 2023, because you use the calendar year as your fiscal year. You won’t have all the documents you need to file your tax return until after the turn of the year. In this case, you will need to wait until you file the partnership return and after that, you can cancel your EIN.
Here’s another example. Say that you made a federal tax deposit for your December payroll taxes at the beginning of January. You won’t be able to cancel your number until you file the quarterly tax return associated with that deposit. Additionally, if you have all of your returns filed but you still owe money, you will have to pay that tax debt before you can cancel the EIN.
Closing Your Account With The IRS
To close your business account with the IRS, you need to follow these steps:
1. Make sure that you have filed any outstanding tax returns.
2. Pay any outstanding taxes due from your business.
3. Send the IRS a letter to request to cancel your account.
These steps apply to a sole proprietor as well as all other business structures. They also apply to non-profits, estates, trusts, and other groups with an EIN. Exempt organizations can only use these steps if they never applied for a formal exemption for tax purposes, aren’t covered in a group ruling, and never filed an information return.
Otherwise, exempt organizations need to file their final tax return and note that the organization has been terminated. There is a slightly different process depending on which type of income tax return your exempt organization files. Your tax preparer can help you if you’re not sure what to do.
What To Include In Cancellation Letter
Now that you understand the basics of how to cancel EIN number, you may be wondering what you need to include in your letter to the IRS. Unfortunately, there isn’t a standard form that you can use to cancel an EIN. Instead, you will need to write out a letter.
Your letter should include the legal name of your entity, your EIN, and your business mailing address. You also need to explain why you want to cancel the EIN. If you forget any of these details, the IRS may reject your request to cancel the number. Make sure that you complete all your filing and payment requirements before you send this letter.
You also have to ensure that you mail the letter to the right address. The IRS uses two different addresses, one in Missouri and the other in Utah. The correct address depends on the location of your business. Sending the EIN cancellation letter to the wrong address can make the process take longer.
That’s all you need to do to cancel the EIN. To ensure you do everything correctly, you may want to work with a professional. They can help you cancel your EIN and apply for a new one as needed.