Can You Get an EIN If You Owe Taxes?
Discover how the IRS handles EIN applications for those with tax debt and understand the connection created between your new entity and past liabilities.
An Employer Identification Number, or EIN, is a nine-digit number the Internal Revenue Service (IRS) assigns to identify business entities. This unique identifier functions similarly to a Social Security Number (SSN) for individuals. Businesses use an EIN for several administrative and compliance activities, including filing federal tax returns, paying employees, and opening a business bank account.
EIN Eligibility with Outstanding Taxes
An individual’s or an existing business’s outstanding tax liability does not prevent the issuance of a new EIN for a separate enterprise. The IRS operates with a clear division between its administrative functions, such as issuing identification numbers, and its enforcement and collection activities. The system for assigning an EIN is for tax administration and is not designed as a screening mechanism to assess an applicant’s history of tax compliance.
When you apply for an EIN, the process does not involve a credit check or a review of your personal or business tax payment record. The application focuses on gathering identifying information about the new business entity and the person responsible for it.
How to Apply for an EIN
The most efficient method for obtaining an EIN is through the IRS’s free online application. Upon successful validation of the information, the nine-digit EIN is typically issued immediately. Alternative methods include submitting Form SS-4, Application for Employer Identification Number, by fax or mail, which involve significantly longer processing times.
A requirement for the application is the designation of a “responsible party,” an individual who ultimately owns or controls the entity. The responsible party must provide their Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). The IRS limits the issuance of new EINs to one per responsible party each day.
Connecting a New EIN to Existing Tax Debt
When you use your SSN or ITIN as the responsible party on an EIN application, you create a direct link between your personal tax record and the new business entity. This connection provides the IRS with visibility into the new business’s financial activities and assets. While obtaining the EIN is not barred by existing debt, this linkage has direct consequences for tax collection.
The IRS can leverage this connection to enforce the collection of pre-existing personal or business tax liabilities. Such actions can include levying the business’s bank accounts or placing a federal tax lien on its assets. A tax lien is a legal claim against your property and can impact your ability to secure financing for the business.