Does a Business Tax ID Number Expire?
A federal Tax ID (EIN) is assigned for the life of a business entity and does not expire. Understand its permanent nature and how business changes affect its use.
A business tax ID number, formally known as an Employer Identification Number (EIN), is a unique nine-digit number the Internal Revenue Service (IRS) assigns to business entities. The direct answer for business owners is that a federally issued EIN does not expire. Once assigned to a business, it remains permanently associated with that specific entity for its entire existence, ensuring consistent tax administration.
The Lifespan of a Tax ID Number
An Employer Identification Number is issued for the life of a business. It is often compared to a Social Security Number for a company, as it is a permanent identifier the IRS uses to track tax obligations. This number stays with the business from its formation until its complete dissolution.
Even if a business becomes dormant, ceases operations for a period, or stops having employees, the EIN assigned to it remains on the books. The number does not get canceled or expire due to inactivity.
When a Tax ID Number Is No Longer Needed
While an EIN itself does not expire, certain business changes can make an existing number obsolete for future operations, necessitating a new one. A primary instance is a significant change in the business’s legal structure, which creates a distinct new entity that must apply for its own EIN. A new EIN is required in situations such as:
- A sole proprietorship decides to incorporate or form a partnership.
- A partnership is taken over by one partner and begins to operate as a sole proprietorship.
- Two companies merge to create a new corporation.
- One corporation becomes a subsidiary of another.
If a business completely ceases operations and formally dissolves according to state procedures, its EIN is no longer needed for ongoing business activities.
Closing Your IRS Business Account
When an EIN is no longer needed because a business has dissolved, you must formally close the associated IRS business account. First, file all final tax returns, including employment tax returns (Form 941, Form 940) and the final income tax return (Form 1120 for a corporation). A dissolving corporation must also file Form 966, Corporate Dissolution or Liquidation. It is important to check the box on these forms indicating that it is the “final return.”
After all final returns are filed, send a letter to the IRS to request the account be closed. This letter should be sent to the IRS mailing address where the business files its returns. The correspondence must include the full legal name of the business, the EIN, the business address, and a clear statement explaining the reason for closing the account, such as the cessation of all business activities. Including a copy of the original EIN assignment notice, if available, can also be helpful.
Reusing or Reactivating a Tax ID Number
An EIN can never be reused or transferred to a different business entity. Once an EIN is assigned, it is permanently linked to that business and will not be reassigned, even if the original business closes. If you start a completely new company, you are required to apply for a new EIN for that legal entity.
However, an EIN can be “reactivated” under certain conditions. If a business closed its IRS account but did not undergo a change in its legal structure, it can resume using its original EIN if it decides to start operating again. For instance, a sole proprietorship that closed its account and later decides to reopen can simply begin filing tax returns again under the same EIN to reactivate it with the IRS.