Do I Need a Tax ID If I Hire Independent Contractors?

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Understanding all the idiosyncrasies of filing taxes for your business is oftentimes confusing. Plain language explanations are hard to come by when dealing with the IRS. To make things even worse, if you make a mistake, you are the one who ends up paying in the end. One thing you should do and make sure you understand is how to apply for EIN or Tax ID. In some cases, you may not need one, which is also good to know, especially if you do not have any employees in your business.

Independent Contractor Vs. Employee

If you do not employ any employees in your business, then you are not an employer and therefore do not need an employer identification number. Independent contractors are not employees. You treat them differently and far less control over them and their work than you would an employee. Since they are not employed by you per IRS definition, you are not required to apply for EIN/Tax ID for independent contractors.

Word of Caution

When you have independent contractors, you must still supply them with tax forms. If you do not have an EIN, you will use your social security number. If you are using your SSN, that will show up on the tax forms you give your independent contractors. So, it is usually a good idea to apply for an EIN to serve as your Tax ID number.

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In addition, if you are not running a sole proprietorship, then an EIN is a good idea. Applying for a partnership or other business form is fine even if you do not have employees as it will give you a single identification number to use for taxes.

Get an EIN

You can also go through the IRS and fill out an EIN number application, but you can also apply for a Tax ID through an outside service. An outside service can help make the process easier and faster. You just fill out your tax ID application with them and they handle the rest. If you need an EIN, then consider using an outside service for a speedier experience.

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