1. What Is a Tax ID?
2. Who Needs a Tax ID?
3. When Can You Apply for a Tax ID?
4. Information Required for Obtaining a Tax ID
5. When Do You Need to Change Your Tax ID?
6. Types of Tax Identification Numbers
7. What Is an Employer Identification Number (EIN)?
8. Tax ID (TIN) vs. EIN

Is an EIN the same as a tax ID? The IRS issues a tax ID for identifying individuals and businesses for the purpose of taxation. An EIN, or an employer identification number, is a type of tax ID issued to businesses as a separate tax entity from individuals.

What Is a Tax ID?

  • A tax ID or Tax Identification Number (TIN) is a nine-digit number assigned to businesses by the IRS.
  • Every company conducting business in the United States must have a tax ID.
  • Since there can be multiple businesses with the same name, a tax ID serves as a unique identifier for taxation and several other business purposes.
  • In addition to the federal government, your tax ID is also used by state and local governments, banks, creditors, and vendors to identify your business.
  • You often need a tax ID for opening a business bank account, hiring employees, obtaining business licenses, and filing payroll taxes.

Who Needs a Tax ID?

You usually need to obtain a tax identification number in the following cases:

  • You have employees or you file any employment related tax return.
  • You withhold income tax while making any sort of payment.
  • You are conducting business as a corporation, LLC, or limited partnership.
  • Your business transacts in any manner with trusts, estates, nonprofit organizations, individual retirement accounts, or farmers' cooperatives.
  • You do not want to use your social security number (SSN) for your business.
  • You want your business financial year to be the same as the calendar year closing in December.

Thus, even sole ownerships and general partnerships may need to obtain a tax identification number.

When Can You Apply for a Tax ID?

Sole proprietorships and general partnerships can apply any time for a tax identification number. However, corporations and LLCs can apply for a tax ID only after their formation document (Articles of Incorporation or Articles of Organization) is approved by the concerned state agency and the date of formation is officially confirmed.

Information Required for Obtaining a Tax ID

You must provide the following information while applying for a tax ID:

  • Your business address
  • Complete name of the owner, manager, and principal officer
  • In case of an LLC, total number of members
  • Primary activities your business is involved in
  • The date of commencement of business
  • The accounting year that your business follows
  • An estimated number of employees you'd be hiring next year
  • Details of any previous EIN that you hold
  • Your telephone and fax number (for the IRS to contact you)

When Do You Need to Change Your Tax ID?

Generally, a tax ID is meant for the whole lifetime of your business. However, you must obtain a new ID under certain circumstances like:

  • Change in business name or location
  • Bankruptcy of LLCs and corporations
  • S-corporation election
  • Change in the type of business entity
  • When a corporation receives a new charter from the secretary of state

Types of Tax Identification Numbers

There are five different types of tax identification numbers:

  • EIN or Employer Identification Number
  • SSN or Social Security Number
  • ITIN or Individual Taxpayer Identification Number
  • ATIN or Adoption Taxpayer Identification Number
  • PTIN or Preparer Taxpayer Identification Number

The EIN Filing Service website of the IRS can help you decide the type of TIN you need to obtain for your business. You can then fill out the corresponding form and apply for a tax ID.

What Is an Employer Identification Number (EIN)?

An EIN is a nine-digit number issued by the IRS for the purpose of identifying your company. The IRS uses the EIN to identify taxpayers liable to file business tax returns. Despite the impression given by its name, you need not have employees to obtain an EIN.

You must obtain an EIN if you meet any of the following conditions:

  • You have employees.
  • You operate as a corporation or a partnership firm.
  • You withhold taxes.
  • You conduct business with a trust, estate, farmers' cooperative, or a nonprofit organization.

Tax ID (TIN) vs. EIN

The IRS uses TIN to identify individuals and businesses for the purpose of ensuring tax compliance. You must mention your TIN in tax returns and other documents that you file with the IRS.

An EIN is a type of TIN. It is used to identify business entities instead of individuals.

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