What Is a Payroll ID Number & How Do You Get One?
Learn what a payroll ID number is, why it's essential for your business's operations and compliance, and how to obtain and use it.
A payroll ID number identifies an employer for tax and reporting purposes. It serves as a unique identifier for businesses, similar to how a Social Security Number identifies an individual. Employers need these numbers to comply with federal and state regulations, manage payroll, and fulfill tax obligations.
Types and Purpose of Payroll ID Numbers
Businesses in the United States encounter two primary types of payroll ID numbers: federal and state. The Federal Employer Identification Number (EIN), also known as a Federal Tax Identification Number (FTIN), is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities. This number functions as a business’s Social Security number for tax purposes. An EIN is generally required for businesses that have employees, operate as a corporation or partnership, file employment or excise tax returns, or withhold taxes on income other than wages paid to non-resident aliens. It is used for federal tax filings, opening business bank accounts, and applying for business licenses.
Beyond the federal EIN, businesses may also need one or more state-level employer identification numbers. These state tax IDs are issued by individual state governments and are distinct from the federal EIN. The necessity for a state tax ID number depends on whether a business must pay state taxes, such as state income tax withholding, state unemployment insurance, or workers’ compensation. Each state has its own requirements, and a business may need separate state IDs for different tax obligations within that state. These state-specific numbers are crucial for ensuring compliance with state tax laws, which can vary significantly across jurisdictions.
How to Obtain a Federal Payroll ID Number
Obtaining a Federal Employer Identification Number (EIN) is a necessary step for many businesses. The IRS provides several methods for applying for an EIN, and the process is free. The fastest and most common method for applicants is the online application system available on the IRS website. Online applications result in immediate EIN issuance upon submission, provided the business is located in the U.S. or its territories and the responsible party has a valid Taxpayer Identification Number (TIN), such as a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
To apply online, an applicant must visit the IRS website, select the “Apply online now” option, and follow the guided prompts. The process requires information such as the business’s legal name, physical and mailing addresses, entity type (e.g., sole proprietorship, LLC, corporation), and the reason for applying. The “responsible party,” the individual who controls, manages, or directs the business’s operations and assets, must be identified and provide their SSN, ITIN, or existing EIN. Complete the online application in a single session, as the system may time out after a period of inactivity.
Alternatively, businesses can apply for an EIN by fax or mail using Form SS-4. When applying by fax, the completed Form SS-4 is processed within four business days, with the EIN faxed back if a return fax number is provided. Mail applications, sent to the appropriate IRS address, take approximately four to five weeks for processing. International applicants who do not have a U.S. presence can apply by phone. Choose only one application method to avoid receiving multiple EINs for the same entity.
Locating and Applying Your Payroll ID Numbers
Once federal and state payroll ID numbers are obtained, businesses use them for ongoing operations and reporting. An existing Federal Employer Identification Number (EIN) can be found on various business tax documents, such as previous tax returns (e.g., Form 1120 or Form 941) or any official correspondence received from the IRS. If a business opened a bank account or applied for specific licenses using its EIN, the number might also be found in bank records or on licensing paperwork. Should a business be unable to locate its EIN, the IRS Business & Specialty Tax Line can provide the number after verifying the caller’s identity.
State-level employer identification numbers are found on correspondence from the relevant state tax agencies, such as the state’s Department of Revenue or unemployment insurance division. These numbers are also present on state tax returns, payroll reports, or other documents filed with state authorities. Businesses should consult their state’s specific agency websites or contact them directly if they need assistance locating a state tax ID.
Both federal and state payroll ID numbers are used in day-to-day business activities. The EIN is included on federal tax filings, such as income tax returns and employment tax forms (e.g., Forms W-2 and 1099). Similarly, state tax IDs are used for filing state income tax withholding, unemployment insurance reports, and workers’ compensation forms. These numbers ensure that all payroll-related taxes and reports are correctly attributed to the business, facilitating compliance with federal and state tax laws.