Do I Need an EIN in Order To Qualify for the New Tax Deductions?

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Recent changes to the tax code, which are being touted as some of the most significant changes to the code in 31 years, mean a significant reduction in big businesses’ tax rates, but what does it mean for small businesses? Do they result in new deductions? To small business owners’ delight, there are a few significant changes that equate to big wins for them as well. However, to benefit from said changes, business owners must first need to apply for EIN.

4 Big Wins for Small Businesses

Many of the changes implemented in the 2018 tax reform bill heavily favor C corporations and larger entities. However, in an attempt to make things fair across the board, the IRS approved four new changes that allow small business owners to enjoy greater deductions as stated below:

  • Deduct 20 percent from gross income if income is less than $157,500 a year
  • Deduct 30 percent of a depreciated item’s value in the first year
  • Pass business and financial legacy to beneficiaries tax-free (monetary limits apply)
  • Claim missed deductions from as far back as 2014

However, as stated above, in order for a business owner to be eligible for any of the aforementioned new deductions, he or she must first need to apply for an EIN.

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How to Apply for an EIN

Whether you’re applying for sole proprietorship¬†or to become a limited liability corporation, the EIN number application process is fairly easy and straightforward. You can apply for an EIN online and for free via the IRS’s website or you can download the requisite form and send it via mail or fax. If you need some help, you can get in touch with a professional company. However, it is important to note that your business must be legally formed in order to obtain an EIN. Moreover, if a business fails to file a return or notice for three consecutive years, it will lose its tax-exempt status. When you submit your EIN application, the IRS will assume that you are legally formed and will start the three-year clock from the date of application. Visit IRS.gov if you need more information regarding new deductions and eligibility requirements.

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