A federal tax ID or taxpayer ID is a number used to companies, businesses, individuals – persons and other legal entities for tax purposes and issued by the Internal Revenue Code – IRC and specific tax law affecting different kinds of legal entities. Social Security Number – SSN is the most common type of tax ID and also called an Employer Identification Number – EIN. If you are going to form a company and establish a business EIN and SSN is highly related to your business.
Do I have to get a Tax ID?
Tax ID – EIN is needed for any business entities. It doesn’t matter whether it is a partnership or corporation. Business owners are in need to have it and establish a payroll.
Federal tax IDs and EIN are furnished and given by the Internal Revenue Service – IRS and they are unique numbers. The IRS may use Federal tax ID and EIN to track the company’s tax responsibilities.
An EIN is not only used for tax obligations but it’s also used for other business objectives. Having an EIN allows you to open bank accounts, apply for credit for the company and to get licenses and permits. Briefly, an EIN is must to conduct more flexible and successful business.
There are three types of federal tax IDs, and each of them has its purpose. Also, it is intended for particular people and companies.
Social Security Number
Social Security Number – SSN is assigned to every US citizen and composed of a nine-digit number. It can also be an identification number for a company. Social Security Number can be used as EIN and Tax ID Number for sole proprietorships and single-owner limited companies – LLCs. In such a case, it can be used for payments, debts, taxes, loans.
Employer Identification Number – EIN
An EIN is a federal tax ID number used by any businesses that have employees or more than one owner. It can be used and applied to trusts and estates. This number is the only ID number of every business.
Individual Taxpayer Identification Number – ITIN
As we have said before the ITIN it a nine-digit number which is a federal tax identifier for most resident and non-resident aliens not able to have a social security number for themselves, their spouses or dependents.
Other than what we talked before, there are two more types of federal identification numbers. They are PTINs and ATINs.