The IRS launched a new tool called a Business Tax Account that some business owners can use to give employees in their company access to the business tax account and request a tax check to see if the business is compliant with federal tax requirements.
Do you qualify for a business tax account?
At present, a Business Tax Account can only be used by a sole proprietor with an Employer Identification Number (EIN). This is likely is the case if the business pays employment taxes and files Form 941, Employer’s Quarterly Federal Tax Return, or pays certain excise taxes and files Form 2290, Heavy Highway Vehicle Use Tax.
The business account cannot be used by a sole proprietor to view personal tax returns—Schedule C of Form 1040 or 1040-SR—filed with a Social Security number (SSN). Instead, a sole proprietor can use an online account. This account allows a sole proprietor to approve and electronically sign a power of attorney and tax information authorization to designate a tax professional, who can then address online many matters related to personal returns.
How to create and use a business tax account?
A sole proprietor can create a business tax account here. If a sole proprietor already has an online account, the same sign-in can be used.
The IRS has self-help tools for creating new online accounts. Users need to go through a verification process to ensure the taxpayer’s identity. This is done through ID.me (), which requires a photo of an identity document (e.g., a driver’s license, state ID, or passport). It also requires a selfie or a video chat with a live ID.me agent. There’s an accessibility guide for those who use assistive technology.
Should you use a business tax account if eligible?
At present, the business online account is very limited. However, the IRS has promised to expand services; when is unknown.
There has not been much of a response to the news about the new business online account. It’s worth noting that the IRS is moving toward more digital and mobile options to interface with taxpayers, so the business online account is certainly a step in this direction.
Caution: If you are a sole proprietor who decides to create an online business account, be VERY careful about which employees you choose to share account log-in information.
Final thought
Sole proprietors should discuss with their CPA or other tax professional the advisability of setting up a business online account at this time. Some may want to take a wait-and-see approach, with action delayed until the online business account is open to all types of entities and more online actions are available.
Other related information for small business owners has been published here.
