What is the importance of an identification number?


Quick Answer

An identification number properly identifies a business's tax accounts for employee and independent contractor purposes, Lee Tax Help explains. An identification number is used on all correspondences and paperwork when filing with the IRS and Social Security Administration.

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Full Answer

An identification number also creates a business's credit file with a number of business credit agencies, the Small Business Association explains. This number is used when applying for credit with banks, leasing companies, lenders and suppliers. Creditors use the identification number to pull the business credit report to determine if the business has credit worthy enough for approval of the requested loan or financing.

Applying for an identification number can be done by obtaining Form SS-4 and its instructions, or online at the IRS website, the IRS notes. Companies can also apply for a number over the phone or by fax. Applying online is the easiest way to obtain a number, Biz Filings reports. This is done via an interview-style application, and as soon as the application is complete and submitted, the number is provided to the business. There is a two-week waiting period between the time the number is obtained and the time the business can start filing returns or making electronic deposits.

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