An employer identification number (EIN) is how the Internal Revenue Service (IRS) identifies your company as a working entity within the United States of America. If you are a company owner, you can use your employer identification number to conduct business needs, such as opening up a bank account or filing for taxes, which would otherwise require an SSN.
Many new company owners are unsure if they need to obtain an employer identification number, otherwise known as a federal tax identification number. The Internal Revenue Service wants you to get an EIN:
If you obtain an EIN, there is a lot that you can do with it. First, it’s required to open a business banking account. You will also need to go through the business tax ID application process if you plan on filing your business’ tax returns come April.
In addition, an EIN is often required to apply for and open a credit card account in your business’ name.
However, even beyond banking requirements, an EIN can serve other purposes, as well. For instance, you may need an EIN to apply for certain business permits, as well as to offer a 1099 tax form to independent contractors who do work for you. This applies for those to whom you paid $600 or more over the course of the year for work they did for you. It also applies if you reimbursed them in the form of benefits equal to or greater than a $600 value.
Business and taxation matters aside, there may be yet another reason to consider getting an EIN for your business. That is, you might just want to protect your privacy. For instance, if you are a business owner who regularly works with and deals with many different clients and individuals, you may not like the idea of divulging your social security number to all of them. After all, this could conceivably lead to identity theft. Consequently, many business owners choose instead to apply for an EIN. This simple move can immediately shield your personal information from any business agreements, making identity theft much less likely.
While using an EIN instead of your social security number does not mean identity theft is impossible, it does add another layer of protection to your personal information, your financial health and that of your family, as well
It is always best to consult with a tax accountant before proceeding, particularly if you have questions you would like answered. However, it’s good to know an EIN can make your business and personal life much easier.
We offer a secure and safe method to obtain an EIN. You can easily apply for an EIN online through our website in the comfort and convenience of your own home. Additionally, you can check your application process and see exactly where you stand.
We encourage you to utilize our site for all of your employer identification number needs. Contact us today to learn more, or visit the FAQ section of our page.