Do Tax IDs Expire? And When You Might Need a New One
Do Tax IDs expire? Understand why EINs are permanent for businesses, when a new one is truly needed due to entity changes, and how to manage your identifier.
Tax Identification Numbers (TINs) serve as unique identifiers for individuals and entities within the United States tax system. A common question concerns the longevity of Employer Identification Numbers (EINs). EINs, once assigned, do not expire, and this permanence ensures a consistent identifier for tax purposes throughout a business’s operational life. However, specific changes to a business’s structure or ownership may necessitate a new EIN. This article clarifies the enduring nature of EINs and outlines when a new one may be required.
Understanding Tax Identification Numbers
Taxpayer Identification Numbers are issued by the Internal Revenue Service (IRS) or the Social Security Administration (SSA) for administering tax laws. These numbers track tax obligations and ensure compliance. Several types of TINs exist, each serving a distinct purpose for various taxpayers.
The Employer Identification Number (EIN) is a federal tax identification number for business entities, similar to a Social Security Number (SSN) for individuals. Businesses, including corporations, partnerships, and most limited liability companies, use their EIN for tax filings, opening business bank accounts, and hiring employees. For individuals, the SSN is the primary TIN, used for personal tax filings and employment. Individual Taxpayer Identification Numbers (ITINs) are issued to non-resident and resident aliens and others who need a U.S. taxpayer identification number but do not qualify for an SSN.
The Permanent Nature of Employer Identification Numbers
Once the IRS assigns an Employer Identification Number to a business entity, it becomes that entity’s permanent federal taxpayer identification number. An EIN does not have an expiration date and remains associated with the specific business for its entire existence. Even if a business undergoes changes like a new address or banking information, the original EIN remains valid as long as the legal entity structure stays the same.
This permanence provides stability for tax reporting and compliance, allowing the IRS to consistently track a business’s financial activities. The assigned EIN will not be reassigned to another business, even if the original business ceases operations. This identification facilitates consistent record-keeping for the business and the IRS, simplifying tax return filings and financial interactions.
When a New Employer Identification Number is Required
While an EIN is permanent, certain significant changes to a business’s legal structure or ownership necessitate a new Employer Identification Number. These situations create a new legal entity, requiring its own unique tax identifier.
A common scenario requiring a new EIN is a change in the legal entity type. For instance, if a sole proprietorship incorporates, or a partnership converts into an LLC, a new EIN is required because a distinct legal entity has formed. Similarly, an LLC that changes its tax election to be taxed as a corporation or S corporation may also need a new EIN.
Changes in ownership can also trigger the need for a new EIN. If a sole proprietorship with an EIN is purchased or inherited and operated as a new sole proprietorship, a new EIN is needed. For partnerships, if the partnership terminates and a new one is formed, or if one partner takes over and operates the business as a sole proprietorship, a new EIN is required.
Corporations may need a new EIN if they receive a new charter from the secretary of state, become a subsidiary of another corporation, or change their structure to a partnership or sole proprietorship. In a merger, if a new corporation is formed, a new EIN is necessary for the newly created entity. Situations involving trusts or estates, such as the creation of a bankruptcy estate for an individual or a living trust converting to a testamentary trust, also necessitate a new EIN for the new entity.
Managing Your Existing Employer Identification Number
Even though an Employer Identification Number does not expire, businesses must manage their existing EIN when circumstances change, particularly when operations cease or information needs updating. An EIN cannot be canceled or deleted from IRS records; it becomes inactive if a business permanently closes.
To close a business and deactivate its EIN, the IRS requires filing all necessary final tax returns and paying any outstanding taxes. After fulfilling these obligations, send a letter to the IRS including the business’s complete legal name, EIN, address, and the reason for closing the account. This informs the IRS the business is no longer active.
Changes to business information, such as a change of address, business name, or the responsible party, do not require a new EIN. Instead, these changes must be updated with the IRS. For instance, a change in the responsible party (the individual with ultimate control over the entity) must be reported to the IRS within 60 days using Form 8822-B. Updating this information maintains accurate IRS records. If a business that previously closed later reopens under the exact same legal entity, the original, inactive EIN should be used again.