The federal tax number, more commonly known as the EIN, is also referred to as the employer tax number. The EIN number is assigned to business entities and is obtained through the EIN application process. This identification number simplifies the tax reporting process of the US Internal Revenue Service (IRS).
Just like social security numbers (SSN), they expire on rare occasions and are never reallocated to another business. In this content, we will talk about the EIN number in detail. We will tell you in which cases you will need this number.
Who Can Get a Federal Tax Identification Number?
The basic requirement for an EIN application is that the applicant has a business establishment in the USA. Most organizations operating in the US can easily obtain a tax identification number. This applies to business entities such as sole proprietorships or LLCs, as well as government agencies and nonprofits.
Why do you need a federal tax identification number? You need a tax identification number for many reasons, including an obligation to pay taxes. Businesses use this number to track their consumption tax returns, employment tax returns and tax returns. Here are some important reasons to start the EIN application process:
- Banking and Finance: In most cases, banks and lenders require any business to have a valid federal tax identification number to open a bank account.
- Employment: If you are planning to recruit for your business, you will need a tax ID. This is because the IRS tracks payroll tax transactions with your federal tax number.
- Self-employed retirement plans: You need an EIN or tax identification number to track and facilitate tax processing related to self-employment retirement plans.
- Situations where sole proprietorships need an EIN: Sole proprietorships need a federal tax identification number when filing for bankruptcy. Therefore, sole proprietorships must have already started the EIN application process and have an EIN number. This is because in the event of bankruptcy, the people who will buy the business may not have the intention to run the business as a sole proprietorship in the future.
What are the Benefits of an EIN Number?
While many sole proprietorship owners do not require a tax identification number, it is still beneficial to have a tax identification number. Sole proprietors acting as independent contractors do not need to provide their Social Security Number when they have a federal tax identification number, thereby reducing their potential for theft.
Also, having a federal tax identification number will make you appear more professional to your clients. This will help you expand your customer base and solidify customer relationships. Starting the EIN application process to obtain a federal tax identification number is fairly simple.
To get the EIN number, companies just need to submit an SS-4 Application form to the IRS. You can also submit your application online and obtain your federal ID number more quickly and easily.
Is It Easy to Get an EIN Number?
In the USA, you must obtain the taxpayer identification number for your tax obligations. There are different taxpayer identification numbers. In this content, we’ve given information on taxpayer identification numbers for companies. And also you can find all the questions you are wondering about the individual tax number from our other contents.
Tax obligations vary at the state and local level. It is possible to get the required tax identification number online. However, it is not as easy as it seems to provide your tax status appropriate to your status. It is important to get help from a team that has professional knowledge and experience in the implementation of tax laws. This team will support you and your company in the best way in tax transactions. Working with an agency with a professional team during the EIN application will make your work easier.