The topics included in “Understanding Your EIN” are:
- What is an EIN
- Information by type of business entity
- When you need a new EIN
- How to apply for an EIN
- How to complete Form SS-4
- Where to apply for an EIN
- How to avoid common problems
Information by Type of Business Entity
- Definitions of various entity types
- Which forms each entity type may file
- When you need a new EIN
- When you don’t need a new EIN
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What is a Federal Tax ID or EIN-TIN (Employer Identification Number)?
A Federal Tax ID, also known as an Employer Identification Number (EIN) or a Taxpayer Identification Number (TIN), is an identification number assigned to your business by the IRS designed to identify your business to federal agencies. Similar to how a SSN is issued to an individual, a Fed Tax ID or EIN is issued to a business.
Do I need a Federal Tax ID or EIN?
All legal businesses need a Federal Tax ID or EIN to operate, the criteria is as follows: employee(s); operates as a corporation or partnership; files an employment, excise or Alcohol, Tobacco and Firearms tax return. So, basically if a business has any employees or pays any taxes, it needs a Federal Tax ID (simple – huh!).
Why you need a Federal Tax ID or EIN?
You will need a Federal Tax ID/EIN in order to open a bank account, apply for credit, fill out W-9 forms for clients, and file your tax return. Even if you don’t need one, most business advisers recommend you get one and use it instead of your SSN.
Legally, you are required to identify your business with one of two numbers: either your Social Security Number or an EIN (Employer Identification Number, a.k.a. Federal Tax ID Number). If you are a sole proprietor, your Social Security Number can be used on all of your government forms and other official documents, but most small business advisors recommend that you apply for an EIN and use that number instead. If you are a corporation, LLC, or other state-level entity, you must obtain an EIN because your business is an entirely separate legal entity
When do I need to obtain a Federal Tax ID Number (EIN)?
Great question, and the generally you should obtain a Federal Tax Id:
- If you have a corporation
- If you have employees
- If you need to open a business bank account
- If you want to build corporate business credit