Show Sole proprietors do not need an Employment Identification Number, unless certain issues arise.An Employment Identification Number ("EIN"), also referred to as a Taxpayer Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service ("IRS") for the purposes of tax reporting. It's kind of like a Social Security Number, except that it is for businesses. Corporations and partnerships are required to have an EIN. However, if you are a sole proprietor, the IRS does not require one. Instead, you can use your Social Security Number and report your income and expenses on a Schedule C tax form (http://www.irs.gov/pub/irs-pdf/f1040sc.pdf). However, many sole proprietors still elect to use an EIN because it reduces the chances of identity theft and banks often require one to open a business account. Even if you are a sole proprietor, you will need an EIN if you have one or more employees (not if you only use independent contractors), use a Keogh retirement plan, or file pension or excise tax returns. An EIN is also required if you change the structure of your business (for example, you change from a partnership or corporation to a sole proprietorship). In addition, an EIN is required for certain organizations, such as trusts, estates, IRA's, real estate mortgage investment conduits, farmer's cooperatives, plan administrators, and non-profit organizations. How to Apply for an EINThe IRS provides a free service to apply for an EIN. The service allows you to submit an IRS Form SS-4 by mail, phone, fax, or online. You can obtain a copy of the IRS form and information on filing at the IRS website at www.irs.gov. Online. This is the easiest and quickest way to get an EIN. You can apply at www.irs.gov/businesses/small/article/0,,id=102767,00.html. Phone. You can receive an EIN almost immediately by calling the Business & Specialty Tax line at (800) 829-4933. International applicants should call (267) 941-1099. Fax. You may also fax your SS-4 form to (859) 669-5760. International applicants should fax their form to (267) 941-1040. Mail. This is the slowest way to receive your EIN. The process by mail usually takes four weeks. If your principal business, office or agency, or legal residence is located in the District of Columbia or any of the fifty states, you must mail a SS-4 Form to: Internal Revenue Service If you have no legal residence, principal place of business, or principal office or agency in the District of Columbia or any state, you must mail a SS-4 Form to: Internal Revenue Service In this video, you will get answers to these questions: What’s the difference between an EIN, tax ID, and a
social security number? That’s the question I’m answering today. I’m Aaron Hall, an attorney for business owners in Minnesota. I was asked this question the other day, and I thought, you know what, that would be a helpful video because there’s a lot of ambiguity around EINs, social security numbers, and the term, tax ID. Now let’s talk about EIN. It stands for employer identification number. It’s issued by the IRS. The EIN or employer identification number is given to businesses and
trusts, regardless of whether they’re actually employers. It’s basically saying, this is the tax number for a business or for a trust. So that’s an EIN. Individuals, we have a tax number, it’s our social security number. That’s given to us when we’re born, and that social security number applies to each individual. Originally, individuals were going to be part of the social security program, but now it’s essentially used as a tax identification number. And now let’s talk about the term tax
ID number or tax identification number. Tax identification number encompasses both an EIN and a social security number. So for example, let’s say you want to open up a bank account, the bank will say, “Please enter your tax ID number here.” Well, if the account is under the name of an individual, you use your social security number. If the account is under the name of a business, like an LLC or a corporation, you’ll use your EIN number for the business. That is how the government keeps track of
which accounts are owned by an LLC, a corporation, an individual, et cetera. Keep in mind then that companies, businesses, financial organizations, will report to the government, in particular, the IRS significant transactions and information about these accounts. That for example is how the IRS may know that an audit is needed. If there has been $100,000 received in an LLCs account, and the bank reports that information to the IRS, under that EIN number, the IRS computer systems will say, “All right, was there a tax return for this EIN number? If no, hey, what are we going to do about that?” And the IRS may take action based on that. So, tax ID numbers include EINs for businesses and trusts and security numbers for individuals. And it is information that you put on accounts or use to identify the individual or entity that maybe owns an account or owns some other asset. All right, so there you have it. That explains the difference between an EIN, tax ID number, and social security number. For more information about topics like this, you can see the link to my website at aaronhall.com, which is in the description below. If you find these sorts of videos are helpful and you’re interested in more, you’re welcome to subscribe. And if you have any questions, feel free to add them in the discussion section below. Thanks for joining me here today. |
Is fein same as social security number
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