Business owners, solopreneurs , and self-employed individuals often question whether they need an employer identification number (EIN). Some small businesses can operate without one. However, it’s always best to do your research first to ensure your setup for success. Let’s look at what an EIN number is, who needs one, and how to use it.
Getting a business EIN number, also known as a business tax ID number, helps establish your business and will help you keep your legal and financial matters in order.
Most businesses can benefit from an EIN.
According to the IRS, your business will need an EIN if:
Beyond filing taxes, you may also need an EIN to:
Note that having an EIN is necessary if your business pays employees or independent contractors.
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Start hereWhile an EIN isn’t always necessary, it does have benefits. This includes:
Another reason you may want to apply for an EIN is your privacy. For example, if you’re a contractor who works with a large number of clients, disclosing your Social Security number may expose you to identity theft.
The IRS allows you to apply for an EIN for free on its website. The application process is relatively easy. In most cases, you can apply online and receive your EIN immediately.
Here’s a summary of what to expect when filing:
You’ll need certain information to complete the EIN application, including:
The responsible party is the person responsible for the company, which is also the person who will sign the application.
If you make common changes to your business, like changing the name or address of your business, you won’t need a new EIN. However, if the ownership or structure of your business changes, you will need to apply for a new EIN.
Depending on your business structure, here are some instances when you’ll need to get a new EIN:
On the other hand, you do not need to apply for a new EIN if:
If you elect a different taxation for your business, you will instead use Form 8832 to update the IRS.
Your EIN is a nine-digit number unique to your business. An EIN identifies your business in the same way your Social Security number identifies you. The online EIN application process is straightforward, making it quick and easy to get an EIN. Plus, with payroll software like QuickBooks Payroll, you can use your EIN to pay employees and contractors.
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You can find your EIN on the letter you receive from the IRS or a previously filed tax return for your business. You can also call the IRS Business and Specialty Tax Line at 800-829-4933.
Is an EIN the same as a tax ID number?An employer identification number (EIN) is different from a tax identification number (TIN). The main difference is that the EIN identifies a company while the TIN identifies an individual.
Is an EIN the same as a Social Security number?A Social Security number is different from an EIN. A Social Security number tracks an individual’s lifetime earnings and the number of years they worked.
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