Your tax ID number is a string of digits the IRS uses to distinguish your business from the other 28 million small businesses in the USA.
Here's how to tell whether you need a tax ID number, how to get one, and the different types available.
"˜Tax ID number'—also known as a TIN—is a term used by the IRS to signify any type of number you use to identify your business.
This number can be used to file your taxes. Also, you'll need a tax ID number to open a business account or get a loan from a bank.
If you operate a sole proprietorship without any employees, or a single person LLC, you don't need a tax ID number to file your taxes.
All other business structures, including any businesses with employees, need tax ID numbers to file their taxes.
And, as mentioned, you'll need a tax ID number for business banking.
Even if you're don't need a tax ID number to file your taxes now (e.g., you're currently don't have any employees), it's in your best interest to get one as soon as you go into business. Your best bet is to apply for an EIN.
Why the rush? Getting an EIN is free, and doesn't take much time or effort. It gives you the freedom to grow your business in the future. When you eventually decide it's time to open a business bank account, hire employees, or restructure your business, you're all set. Getting a tax ID number now will save you a step later on, when your hands are full helping your business grow.
Helpful reading: How to Hire Employees: 11 Tips for a Great Hiring Process
Need help setting up a TIN? Let AccracyTax take care of the crucial stuff. A tax expert will handle the heavy lifting, so you can focus on your business. Learn More.
You may already have a tax ID number, and not even know it.
There are three types of ID number that can serve as your identification for tax purposes:
Either your SSN or ITIN can serve as your tax ID number. SSNs and ITINs both have additional uses besides tracking your business.
However, the EIN is essential if you want to hire employees. Here's how to choose which tax ID number is right for you.
An SSN is the most common kind of personal ID number in the United States. Only U.S. citizens, permanent residents, and non-immigrant working residents can get SSNs.
You need an SSN to:
How to get an SSN
The US Social Security Administration (SSA) provides SSNs. To get one, visit your local SSA office.
To apply for an SSN, at minimum you'll need a U.S. birth certificate or a U.S. passport.
Plus, if you have one, you should also provide a U.S. driver's license or another state-issued ID.
In the event you can't get ahold of these documents, you may be able to provide the SSA with:
You can provide a photocopy of any of these documents, but it needs to be verified by the issuing agency.
Still have some questions? The SSA has more info on SSN identification documents.
Using your SSN as a tax ID number
If you operate a sole proprietorship without employees, or a single-person LLC, your SSN serves as your tax ID number by default.
Already using your SSN to file business taxes? We recommend applying for an EIN. It will prepare you in advance in case you decide to hire employees or change your business structure.
If you aren't eligible for an SSN, the IRS may provide you with an ITIN instead.
Typically, you can get an ITIN if you're:
You can only use an ITIN for tax reporting purposes. ITINs can't be used to:
How to get an ITIN
To get an ITIN, you need to submit IRS Form W-7, Application for IRS Individual Taxpayer Identification Number.
On Form W-7, you must provide:
You can submit Form W-7 in person or by mail. The IRS provides in-person locations and mailing addresses.
Using your ITIN as a tax ID number
While you can use your ITIN to file taxes for your sole proprietorship or LLC, we recommend getting an EIN. You don't need to be a U.S. citizen to get an EIN, and it can benefit you down the line as your business expands.
While it's called an "˜employer identification number,' you don't need to have employees already to get an EIN. In fact, you're better off getting your EIN before you ever make a hire—it's quick and easy to do, and once you decide to bring employees onboard, you'll already have what you need to make it happen.
You need an EIN to file taxes if your business is:
Typically, you also need an EIN to:
How to get an EIN
Getting an EIN is quick and relatively straightforward. Check out our article on how to get an EIN.
Keep in mind that just because you have an EIN, don't assume it's written in stone—there are occasions when you may need to change your EIN. There are other cases where your EIN may remain the same, but you will still need to notify the IRS of changes to your business.
If you have an EIN, you need to get in touch with the IRS in the event that:
* In these circumstances your EIN doesn't change, but the IRS still needs to be notified
If you're unsure whether you need to notify the IRS of a change, check out their page on EIN changes.
You can let the IRS know if your business name and/or address changes when you file your tax return. How you do this varies according to the types of tax forms you file.
To change your business entity type, file IRS Form 8832. You use the same form if you are electing a different tax status (e.g., if you are an LLC, but you would like to file as a corporation).
For all other significant business changes, you need to request that the IRS changes your EIN.
Ideally, this should be written on company letterhead. Your letter must include:
Where to send an EIN change letter
The address you send your EIN change letter to depends on which state your business is based in.
If your business is based in:
Send your EIN change letter to:
Internal Revenue Service
Stop 343G, Cincinnati, Ohio 45999
Or you can fax it to 859-669-5748.
If your business is based in:
Send your EIN change letter to:
Internal Revenue Service
at M/S 6273, Ogden, Utah 84201
Or you can fax it to 801-620-7116.
In order to file a state tax return for your business, you'll need a state tax ID number.
When your register your business with your state's Department of Revenue, you'll also apply for an ID number. This process varies state by state, but it's similar to applying for a federal EIN number.
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While all businesses need a tax ID number, the specific type you'll use depends on what kind of business you run, as well as your status as a U.S. citizen, resident, or alien.
In all cases, however, the easiest approach is to apply for an EIN. It will save you work down the line, and you can use it to open a business bank account or borrow money for your business. Our article on how to get an EIN number breaks the process down into simple terms for you.
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