How Do I Know What Type of Tax ID to Apply For?

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A tax ID, also called a Taxpayer Identification Number or TIN, is a number used for identification and tax purposes in the United States. The Social Security Administration or the Internal Revenue Service (IRS) assigns different kinds of tax IDs, including Social Security Numbers, Individual Taxpayer Identification Numbers, and Employer Identification Numbers.

When an individual sets out to start a business, the type of tax ID required will depend on the type of entity established and its future business actions.

Selecting the Best Tax ID Business Type

There are several types of tax IDs or TINs. The most common IDs for businesses include:

  • Social Security Number (SSN)
  • Individual Taxpayer Identification Number (ITIN)
  • Employer Identification Number (EIN)

Most Individuals working in the U.S use a Social Security Numbers as a tax ID. This type of tax ID is used on tax returns, and by sole proprietors or Limited Liability Companies that have not hired any employees.

Non-citizens, such as individuals here on temporary visas or non-resident aliens, use ITINs to identify themselves for tax purposes, as well as open bank accounts.

Employers, sole proprietors, corporations, partnerships, non-profits, trusts, and estates use what’s called an Employer Identification Number or EIN to identify their businesses for both tax purposes, and to establish accounts and credit.

Selecting the Right Entity for an EIN

If you’re starting a business, it’s likely that at some point you’ll need to select a tax ID number. In most cases, obtaining an EIN is the answer.

While some types of business entities do not need an alternative tax ID, you might still want to apply for an EIN, as it allows business owners to flex organizational advantages, like opening a bank account or acquiring company credit.

Filing your taxes can often be intimidating, if not overwhelming, whether for individuals or business owners. In fact, many people are so worried about how to file that they put off doing so until the last minute. Regardless of whether you are an individual, sole proprietor or big-business owner, choosing the type of tax ID that is best for you is simple if you go to irs-ein-tax-id.com. Read on to get a run-down that will clear up all your concerns. 

Tax ID Types

There are three choices, based on who you are and what you are planning to do. They include social security numbers (SSN), individual tax identification numbers (ITIN) and employer identification numbers (EIN). Basically, if you are an individual and/or sole proprietor of a business with no employees, you can use your SSN. ITINs, on the other hand, are used by non-citizens who might be here as non-resident aliens or on a temporary visa. Finally, EINs are used by businesses classified as sole proprietors, partnerships, corporations, trusts, non-profits or estates.

The Process of Getting Your New EIN, if You Need One

Getting your new EIN is quick and simple, particularly after you choose the type of tax ID best for your business. Then, all you have to do is fill out the application and submit it. You will receive your new tax ID by email that day, usually within the hour. If you submit your application after 9 p.m., you will receive your EIN the next business day.

Ultimately, you should not be intimidated by choosing the type of tax ID best for you. Just a quick visit to irs-ein-tax-id.com will answer all your questions and make things clear to you, so you’ll be doing business in no time.

Here is a breakdown of the three types of tax IDs and for whom they are best suited:

Social Security Number

A social security number is a nine-digit identification number assigned to every United States citizen upon their birth. Hence, this identification type is perfect for a business with one owner, referred to as a sole proprietorship. This individual owns 100 percent of the business and is responsible for all of its payments, bills, loans, taxes and debts and is the only recipient of its profits. 

Employee Identification Number (EIN)

This form of identification is used for all types of businesses, including limited liability companies (LLCs), corporations and partnerships. This ensures that every business entity has its own identification number, which it uses for filing and paying taxes, as well as for all other business uses. This type of identification number is required of all businesses, even those who do not have any employees. In addition, many banks require an EIN from any business that would like to open a bank account. The only exception to this rule is for single-owner LLCs, who, like sole proprietors, use their social security number for all official business.

Individual Taxpayer Identification Number (ITIN)

This nine-digit identification number is used for those people who are required to have such identification but are not eligible for a social security number. These include U.S. resident and non-resident aliens who are filing a U.S. tax return, the spouse or dependents of a U.S. citizen or resident alien, as well as the spouse or dependents of a non-resident alien visa holder.

While these are fairly straightforward, it is always a good idea to consult with a tax accountant to make sure you are choosing the ID that is best for you.

Select Your Entity Type to Apply for a Federal Tax ID Today