How to Cancel an EIN Number

Recently, I had a heart-to-heart with a friend who was feeling completely overwhelmed by her small candle making business.

Between managing inventory, marketing, and sales, she was balancing her family, studies, and a job all alone. And even though she was a go-getter, it was all starting to feel like too much.

She was thinking about shutting down her business for now to focus on her studies and job. Naturally, she wanted to know how to cancel her EIN number.

She was worried that if she didn’t go through the process of canceling her EIN, she would continue to be responsible for filing tax returns and possibly paying taxes for a business she no longer runs.

Additionally, it could lead to fines or penalties from the IRS for failing to properly close out her business’s tax obligations.

If you’re in a similar spot, I totally get it. It’s tough. You’re probably wondering how to dissolve your business, cancel your EIN, what it’s going to cost, and what steps are involved.

Don’t worry, I’ve got you covered.

In this guide, I’ll walk you through everything you need to know: how to cancel your EIN, whether you can do it yourself, and how to apply for a new one if you need to do so in the future. 

Let’s dive in and take this one step at a time. Shall we?

First Question That Comes to Your Mind: Is It Really Possible to Cancel an EIN?

Technically, you can’t cancel an EIN. The IRS does not “delete” EINs, but you can close your business account associated with the EIN.

This means the IRS will no longer expect any filings under that EIN, effectively rendering it inactive.

Clear?

In What Situations Can You Cancel an EIN?

There are several scenarios where you might need to close your EIN account. Here are a few scenarios:

✔️  Dissolving the Business: If you’re shutting down your business completely, it’s time to cancel that EIN.

✔️  Changing Business Structure: Maybe you’re changing your business structure and leveling up from a sole proprietorship to an LLC. That change means you’ll need a new EIN.

✔️  No Further Use: Got an EIN but never actually started the business? It happens. If you don’t plan to use it, canceling it is a good idea.

✔️  No Employees: If you had employees but don’t anymore and you don’t need the EIN for anything else, it’s time to close it out.

How Can EIN Be Canceled for Each of These Situations?

Scenario #1 Dissolving the Business

ng a business means closing it down completely. This could be due to several reasons – maybe the business isn’t profitable, the owners are retiring, or the market conditions have just gone bonkers. Whatever the reason, dissolving a business is a BIG decision that involves multiple steps. 

Here are a few steps:

💡 Complete Final Filings

Ensure all final tax returns and other necessary filings are completed. This includes income tax returns, employment tax returns, and any other applicable forms. Make sure all dues are paid, and accounts are settled.

💡 Send a Letter to the IRS

Write a detailed letter to the IRS that includes your EIN, business name, business address, and the reason you wish to close your account. Clearly state that you have filed all necessary returns.

💡 Include a Copy of the EIN Assignment Notice

If you still have that original EIN Assignment Notice or SS4 letter, attach it as an additional document. It helps the IRS find your account faster.

💡 Mail the Letter

Send your letter to the following address:

Internal Revenue Service
Cincinnati, OH 45999

Pro Tip: Make sure to send the letter via certified mail with a return receipt requested. This way, you have proof that the IRS received your correspondence.

Scenario #2 Changing Business Structure

Changing your business structure often means transitioning from one type of business entity to another, such as moving from a sole proprietorship to an LLC. This change can offer benefits like limited liability protection, tax advantages, or a more formal structure. 

Here’s what you need to do in this scenario:

💡 New EIN for New Entity

When you change your business structure, like moving from a sole proprietorship to an LLC, the IRS considers this a completely new entity. It’s like you’re starting a brand-new business, and every new business needs its own unique EIN.

💡 Close Old EIN Account

Follow the same steps as dissolving the business. Write a letter to the IRS with all relevant details, include a copy of the EIN Assignment Notice, and send it to the Cincinnati address.

Scenario #3 No Further Use

Sometimes, you might get an EIN but never actually start the business. This could be due to a change of plans, lack of funding, or deciding that the current business idea isn’t viable due to market conditions. Here’s what you should do in such scenarios:

💡 Inform about “No Business Activity” Status

Write to the IRS explaining the situation. Tell them you received the EIN but never used it.

💡 Provide All Necessary Information

Include your EIN, business name, business address, and a statement that the EIN was never used for any business activity.

💡 Mail the Letter

Send your letter to the IRS at the same Cincinnati address.

Scenario #4 No Employees

If you previously had employees but no longer do, then you don’t need an EIN.  You might decide to close your EIN account. This is common for businesses that are downsizing or transitioning to a different business model that doesn’t require employees. 

Here’s how to close your EIN account:

💡 Update Employment Status

Compliance is key here. You need to file any final employment tax returns. This includes Forms 940 and 941, and any other applicable forms. 

Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax, and Form 941 is used to report quarterly payroll taxes, including federal income tax, Social Security, and Medicare taxes. 

Make sure all employee-related taxes and filings are up-to-date.

💡 Write to the IRS

Inform the IRS that you no longer have employees and wish to close your EIN account. Provide all necessary details, including your EIN, business name, and business address.

💡 Mail the Letter

Send your letter to the IRS at the Cincinnati address.

👉 Can You Do It on Your Own? 

Absolutely! 

You can close your EIN account by writing a letter to the IRS with all the relevant details. 

It’s quite straightforward, but if you’re unsure about any steps or your specific situation, seeking professional help isn’t a bad idea. 

Sometimes a second pair of eyes is all you need to make sure you’re on track.

Who Can Help You to Close Your EIN?

If you feel uncomfortable handling this process on your own, here are a few professionals who can assist you:

Accountants

They can ensure all your financial records and tax filings are in order, and help you with the letter to the IRS.

Tax Professionals

They can answer any tax-related questions and ensure you comply with all IRS requirements. You can speak directly with a doola tax expert to receive tailored advice on tax planning strategies, compliance requirements, crucial deadlines, and more.

Business Attorneys

They can guide you through the legal aspects of closing your business or changing its structure, and help with the EIN closure process.

What is the General Fee Involved In EIN Cancellation?

The good news is that there is no fee to close your EIN account with the IRS. 

However, if you hire a professional to assist you, their fees will vary based on their services and expertise.

 It’s always a good idea to get a quote upfront to understand the costs involved.

How to Apply for a New EIN Once You Cancel Your Old EIN

If you need a new EIN after closing your old account, the process is relatively simple. Here are the steps:

✔️  Determine Eligibility

Ensure you need a new EIN. Typically, you need a new EIN if your business structure changes or you start a new business entity.

✔️  Complete the Application

You can apply for a new EIN online through the IRS website, by mail, or by fax. The online application is the quickest method.

✔️  Provide Necessary Information

Be prepared to provide details about your business, including the legal name, type of entity, and the responsible party’s information.

✔️  Receive Your EIN

If you apply online, you’ll receive your EIN immediately. Mail and fax applications take longer to process.

Online: The IRS website offers an easy-to-use online application process that provides an EIN immediately upon completion.

Mail: Complete Form SS-4 and mail it to the IRS. This method takes about four weeks.

Fax: Complete Form SS-4 and fax it to the IRS. You should receive your EIN within four business days.

Don’t Forget This Last Thing After Canceling Your EIN

Alright, you’ve canceled your EIN. You’ve got your paperwork in order. All sorted from your end.

Now what? 

It’s time to get your business finances back on track! 

One key step is setting up a new business bank account. 

Now, when choosing a bank, you want something that makes your life easier, not harder. That’s where Mercury comes in. It’s a digital-first banking platform designed for startups and tech-focused businesses. Here’s why Mercury stands out:

• Zero Monthly Fees: No monthly fees eating into your budget.

• No Minimum Balance Requirements: Flexibility to manage your funds as needed.

• Fee-Free Wire Transfers: Enjoy domestic and international wire transfers without additional costs.

• Easy Account Setup: The account setup process is quick and can be completed online in minutes, making it perfect for busy entrepreneurs like you.

But that’s not all.

Mercury also integrates seamlessly with popular accounting tools like QuickBooks and Xero. Plus, it offers high security with features like two-factor authentication and encryption, ensuring your financial data is safe and secure.

How doola Can Help in Cancelling Your EIN

Cancelling your EIN can feel like navigating a BIG pile of paperwork maze. But don’t worry. doola is here to make it easier for you.. We specialize in helping businesses manage their EIN and other IRS-related tasks. 

Here’s how we make it happen with our “business-in-a-box” toolkit:

🤝 Expert Guidance: Our team is here to give you personalized advice on whether you need to cancel your EIN and guide you through each step. 

✍🏻 Documentation Assistance: We help you prepare all the necessary tax related paperwork to ensure your forms and letters to the IRS are accurate and complete.

📩 Compliance Support: Keeping up with final filings and tax obligations can be tricky. We make sure all your compliance boxes are checked, minimizing the risk of errors or penalties.

🎓 Legal and Financial Expertise: Access to seasoned accountants and business attorneys means you get comprehensive support. We handle every aspect of your EIN closure professionally and efficiently.

All in all, whether you’re dissolving your business, changing its structure, or simply no longer need an EIN, we have the resources and expertise to assist you every step of the way.

Let us take the stress off your shoulders so you can focus on what really matters. Reach out to us today and book a free consultation today.