According to Forbes, Alabama is one of the best places to start a business in the south. However, coming up with a great idea, identifying your target customers, and flipping on the “open” sign is just a portion of the process. You also have to deal with a variety of tax obligations, and for most business owners, that includes obtaining an Alabama EIN number for federal taxes as well as an Alabama tax id number for state taxes.
Wondering where to get started? Then, keep reading. The following guide explains how to get federal and state ID numbers for your Alabama business, and it outlines the differences between these numbers.
How To Apply For A Tax ID Number In Alabama
To get an EIN number Alabama business owners can handle the process on their own, hire an accountant, or work with a business formation company. In all cases, you should first determine if you need this number.
The main reasons businesses need an EIN in Alabama include hiring an employee, withholding tax from certain contractors, paying federal excise taxes, or applying for bank accounts or loans in the business’s name. You also need an EIN to file corporate and partnership tax returns.The vast majority of businesses need an EIN, but there are a few exceptions namely for sole proprietors with no employees and no taxable sales that have not elected to be taxed as S-corps. Once you’ve assessed whether or not you need an EIN, you should gather the information outlined below.
Prepare The Required Information
To obtain an EIN number Alabama business owners need to provide the government with a few details about their businesses including the following:
- Legal and trade or doing business as (DBA) name.
- Contact details for the business.
- Name and Social Security Number or Tax ID of the responsible party.
- Business structure or other entity types (nonprofit, farm co-operative, etc) if relevant.
- Principal business activity and service/merchandise sold.
- Number of estimated employees over the next year.
- First date you’re going to pay wages.
- The reason you’re applying for an EIN.
If your business is an LLC, you also need to note if it was formed in the United States and the number of members. If you want to form an LLC, you may need to register with the Secretary of State before you submit your EIN application. Corporations need to note the state and date of their formation.
After you’ve gathered this information, you’re ready to apply for an EIN. You can apply online, through the mail, or using fax.
To get an EIN online, gather the details above. Then, start the online EIN application. Applying online is the best option if you want your EIN quickly — often, you can get your number as soon as you complete the application.
Submit Your Application Via Mail
If they don’t want to apply online for an EIN number Alabama business owners can apply through the mail. You note the above information on Form SS-4, or you can sign a document allowing your accountant to submit these details on your behalf. Unfortunately, however, requesting an EIN through the mail can take six to eight weeks.
To apply over fax, you should also use a paper application. Simply fax it to the IRS. Then, you can request to have your EIN faxed back or mailed to you.
Frequently Asked Questions
An Alabama EIN number is a nine-digit number that identifies your business on federal tax forms. In Alabama, you need this number if you hire employees, complete banking transactions in your business’s name, file partnership/corporate returns, and for a range of other purposes.
No, the Secretary of State is where you register your LLC. You do not obtain an EIN from the Secretary of State.
No, an EIN and an Alabama tax ID number are not the same. An EIN is a number that you use on federal tax forms and bank documents. An Alabama tax ID number is the number you use on state tax returns. In Alabama, business taxes include sales, property, business privilege, and withholding taxes.