Some places like your bank, accounting software, and certain tax forms ask for an EIN. But what is an EIN, and how do you get it? You may have been asked for an EIN in the past and then told your social security number will also work. What’s up with that?
An EIN stands for Employer Identification Number, and it functions as a social security number for your business. If your business is a sole proprietorship, your business taxes are calculated as personal income and it is not necessary to get one. If you have:
- a different business structure like a partnership or corporation,
- pay employees,
- File employment, excise, or alcohol, tobacco, or firearms tax returns
- Withhold taxes on income other than wages to a nonresident alien
- Have a Keogh plan (tax-deferred pension plan self-employed people)
- Administering certain trusts, retirement plans, or estates
Then you need an EIN.
You probably want an EIN if you are paying more than $600 to a vendor that supplies your business because you will need to file 1099s. There will be more about 1099s in a future post. In the initial months of your new business, it’s not an urgent priority.
When other businesses who you supply as a vendor send you 1099s in December and early January, then you will want an EIN to give them. You can give them your SSN and it will comply with IRS requirements, but do you really want other people having your social security number?
How to Get an EIN:
Between 7a-10pm, Monday through Friday, go to the IRS website and click ‘apply for an EIN’.
They’ll ask for your business legal and tax structure, so filing your business documents with the state you are starting your business is a necessary first step (LLC, Corporation, etc). They’ll also ask why you need an EIN. If you’re just getting started, say ‘starting a business’.
It takes about 5 minutes to your EIN. Make sure you download the document stating your number.
Businesses will offer to get you an Employer Identification Number for a fee. It might not be the best use of your money since this step is so simple.
For more money saving tips for your business, continue to read the posts. To schedule a call with me to evaluate your books and talk about how I can help you with your financials, contact me.
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