Every business, whether it’s a small or a big corporation, as long as it has employees, you are required to have an employer ID number (EIN). Though, it is advisable to have EIN too if you don’t have employees to avoid the hassle. Your EIN is your business unique Social Security number. The term “EIN” is somewhat not appropriate, especially if the company has no employees. But to be a good law-abiding citizen, you need to get EIN to be sure. Plus, it won’t cost you anything, so why not create a small investment in your spare time?
EIN: What Is It?
An employer ID Number is assigned by the IRS (Internal Revenue Service) to identify a particular business for tax purposes. When applying, you need to make sure that you include your business tax ID on any bank account application, employment tax reports, income tax forms, and payments.
Your business tax id will serve the same purpose as your Social Security number for a unique identity.
The Difference Between an EIN and Taxpayer ID Number?
EIN, employer ID, tax ID, and taxpayer ID are often to get mixed up, but in reality, they have a distinct difference between each term – and IRS has specific explanations.
The term taxpayer ID can be one of those different numbers. An employer ID is a taxpayer ID for a particular business, whereas for an individual it is called Social Security Number as the taxpayer ID. But there’s another type of tax id; it is called “Individual Taxpayer ID.” It is used by individuals who don’t have a Social Security number.
Does Your Small Business Need an EIN?
Your business, whether it’s small or big, will need an EIN if you have employees and if you file different kinds of taxes. EIN is also required if your business is taxed as a partnership or a corporation.
However, if your business is a sole proprietorship, you might not need to have an EIN. Or if the business is not registered in your state as an LLC, a partnership, a corporation, or if you don’t have any employees aside from yourself. In this case, your personal Social Security number will serve as your EIN.
But you might need one when you’re planning to start your business and have it apply for a business checking account. Also, you might need an EIN if you plan to apply for a business license.
Steps to Complete your EIN Application
You can have your federal ein number application by using an IRS Form SS-4. Go to the IRS website, download the form, and have it printed out. Answer all the required information even if you’re applying online.
You can complete your IRS Form SS-4 online or over the phone. If you prefer to have assistance, many agencies are offering aid to help you with your application. But be careful, some of these websites are fraud and scam. Make sure that before paying for an assistance check first if their agency is registered or not.