We all know and hear about individual tax ID numbers throughout our lives. We know of our social security numbers; everyone is assigned one from birth. Implement the same concept for businesses, and you’ll obtain the concept behind business tax ID.
Each business needs a tax identification number to pay for its due taxes. However, you must register your business on the IRS’s website to receive it. This number will further be utilized to enable you to file business-specific taxes. It will also be beneficial when hiring employees for your business’s growth, betterment, and maintenance.
The key to determining if you are required to obtain a business tax ID is to understand the actions it enables you to perform. If you find yourself eligible to perform them, then it’s a fact you require the Tax ID number for your business, also otherwise known as EIN.
Now that you understand what tax ID numbers are, you need to understand further the criteria for obtaining one. Once you do so, you will consume the knowledge of the steps you’re inclined to follow to receive one for your business. Without any further ado, let’s get into it.
Am I inclined To Get a Tax ID Number?
If you think that tax ID numbers are necessary for all businesses, you’re severely mistaken. There are some examples of exceptions, like Sole proprietors. That said, it is pertinent to understand that performing certain actions is impossible unless you have a Tax ID for backup. While not every business will be inclined towards getting one for themselves, it is necessary if you’re looking to perform the actions that are allowed only when you have a tax ID.
Here are the main reasons why you should consider getting one for your business:
To File Taxes Separately From Personal Taxes:
You might want to consider registering your business for a tax ID as you might want to send out separately filed taxes for your business. Your business taxes will no longer require you to file them along with your personal taxes. You will finally be enabled to file your taxes separately. Another pertinent mention here is you need a tax ID for all partnerships, LLCs, and corporations that are taxable. You must obtain a tax ID for filing your taxes.
Important When Hiring Employees:
Every business, at a certain point, requires employees to maintain its growth and operate correctly. Suppose you’re inclined to hire employees to operate your business better and maintain growth. In that case, you will have to get a tax ID number, as, without it, you will not be allowed to hire people simply because you are not yet registered as a business.
You May Require One Due To The Industry Of Business You Operate In:
If you’re required to pay certain taxes, except for business tax, you will be inclined to have a business tax ID. A good example would be a trucking company that would be required to pay an excise tax; for this reason, you would need to register and receive a business tax ID.
In addition, you might not be able to open a business bank account, as some financial institutions don’t enable you with their services unless you acquire one. There may be some business licenses for which you need to possess one.
However, this is not the case with all of them. For whatever reason you may need it, it’s never a bad idea to possess one as the time of its need can arrive at any certain unspecified moment.
Tax ID Number VS EIN:
An employer identification number can be obtained by the IRS for your business since your business can file taxes, and the taxes you pay regarding your employees can then be directly paid with your business as the centric body. You will enable yourself to file your business and personal taxes through different means and will no longer be inclined to file both under your personal identity.
Both terms have the same concept behind different names and are continuously used interchangeably. When someone is referring to your Tax ID for your business, they are also referring to your EIN, and vice versa.
On the other hand, some people also refer to a tax ID number when referring to an individual tax ID number, known by its abbreviation to be (ITIN). This number is a certain tax processing number meant for nonresidents, their spouses, and further dependents without a social security number. This calibrated version of the Tax ID number is meant only for individuals and not for further declarations, such as businesses.
So, in general, Tax identification numbers (ITNs) are ID numbers provided by the IRS for properly analyzing, investigating, and keeping an eye on the tax records of their holders. This is one of the common Tax ID numbers, and it is necessary for both individuals and business holders to file their taxes correctly.
The only ID number that the IRS provides to eligible people is the EIN number, otherwise known as your Tax ID number (TIN), for the purpose of filing solely business-related taxes.
It should be clarified that it’s not mandatory that you possess an EIN. Your business can start and operate fine without it. It’s the business’s growth that requires you to register your business and receive a Business Tax ID. As already stated, you require a Tax ID for the completion of important aspects that a business needs to be fulfilled.
How To Get a Tax ID Number In Three Steps:
You will have to work on filling in an online application for your business to obtain your business’s tax ID number. To acquire your ID number, fill in the desired application at IRS.gov and provide the required information, for you cannot acquire the number without doing so.
You can follow the steps below to get the Tax ID number as swiftly as possible and without any hassles. The given steps will enable you to get your hands on it through a smooth experience, so focus on them throughout to avoid any issues.
1st Step: Register Your Business With Your State:
The State you plan to operate in is one of the desired inputs before filling in the application. So, before you complete your online application, the IRS requires information regarding the state you’re willing to operate in. The variation of entity and information regarding information will be required when you begin to fill in the Tax ID application.
The Online application will allow you to fill in the desired information before it can be submitted, and this information will include the legalized business name, date of formation, state, and address of where you’ve registered your business.
Another pertinent mention here is that the legalized name must be further approved by the state of the operator being included in the matter before you fill out your application. A sole proprietor who is responsible for filing the excise taxes is still eligible to get a Tax ID number once a DBA, which denotes forming a business under a different name than the original legalized name of the owner, has been signed and registered within the state.
2nd Step: Gather The Required Information:
To move to the next step, you should know that you will need a hefty amount of information regarding the owner of the business and the business itself. You will be needed to showcase the following information, so gather it beforehand,
- Name of business.
- Name of the owner of the business.
- Personal Tax ID number of the owner of the business.
- Mailing Address for the business.
- Type of business entity.
- The state your business resides to operate in.
- The Date of formation of your business.
- The number of employees you expect to keep on a payroll in the next 12 months.
- The Date you started paying wages to your employees (if any)
In case you didn’t already know this, to receive a business Tax ID number, you will have to situate the business in the US and have a valid Personal Tax ID number for yourself.
3rd Step: Submitting Your Application:
Once you’re done filling out the application and you have added every bit of the required information on the form, all you need to do is validate your information and finalize the application by situating and correcting any errors in the application, if any.
Now that your information is validated, you can proceed with the application and immediately acquire your business Tax ID number in a PDF format. You can now save the Tax number and choose to print it out if thought necessary; either way, you have now successfully received your Tax ID number and are officially a holder of the Tax ID for your business.
What To Do If You Lose Your Business Tax ID Number?
If you ever lose your Business Tax ID for some reason, don’t panic; you can always call the IRS helpline regarding your issue. Furthermore, they will require some information regarding the confirmation of your identity. Once they confirm your identity, you will be freely provided with the Tax ID number you previously lost. Take good care of it this time around.
Another pertinent mention here is that when your application has been finalized are you receive the EIN, the number you received can no longer be cancelled. With that said, if you ever feel you no longer require the EIN number or your Business Tax ID number, you can opt for having the IRS close your business account.
Even after the completion of this step, your Tax ID number will be available to acquire if you ever feel the need for it in the future. You should know that it will not be reassigned to any other business.
To receive your EIN or Business Tax ID number, you must recognize if you fulfill the criteria of its requirement, it can come with a variety of perks that can end up benefiting you in the future, so choosing to avail it as soon as possible can implement positive effects on your business sooner or later.
Further, you will have to fill out an application on the IRS official website and input the desired information, which has been stated above, for the purpose of your preparation beforehand. The next step involves validating the information you input on the application and after you’re done rechecking and validating it, you can proceed towards the final step of receiving your Tax ID number.
Through these three simple steps, you can acquire your tax ID number or EIN immediately if you have the right information available at the right time.
What Does EIN Stand For?
EIN stands for Employer Identification Number and is provided by the IRS to identify a specified business under a specific name. This term is often switched with the “Federal Tax Identification,” but it generally means the same.
Can a Foreigner Obtain a US Tax ID?
ITINs are provided to people regardless of the location they’re situated in. This further illustrates that both residents and non-residents may have a US Filing or reporting requirement.
Do You Require a US Address To Get An EIN?
The IRS is not solely interested in the state where your business is operating. You are going to need a social security number or a US address to further clarify the application you need to fill out to receive the EIN number.
How Much Does a Tax ID Cost?
A Tax ID number can be obtained for free without any payment schedules. It’s free to apply for an EIN number as you require it to pay your business tax, hire employees, and open a business bank account as well. Some monetary management service-providing institutions don’t allow you to open a business bank account without an EIN.
What Is ITIN?
A non-US resident can obtain an ITIN, and it stands for Individual Taxpayer ID Number. For the people who cannot receive an SSN (social security number), they must use an ITIN to pay their taxes during the time they stay in the US.