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A tax ID number, also called an employer identification number (EIN), is a federal number assigned to companies by the IRS. The federal tax ID number is different for each business, letting the IRS differentiate between businesses. It’s also used by the IRS for for verification purposes. Regardless of the size of your business, there are many reasons to have a tax ID number or EIN,, which should be carefully examined.
What is a small business tax ID number?
The tax ID number for a small business is a federal number given to a business for verification, regulation, and tax purposes. In order to pay taxes, your business needs to have a tax ID number that was specifically assigned to your company. As a US citizen, your tax ID number is your social security number, but when filing as a business, in most cases, you need a separately assigned number from the IRS.
Does my small business need a tax ID number?
There are some stipulations that require small businesses to obtain a tax ID number, but in general, all businesses should have one. If your business sells products that are taxed, you need a federal tax ID number. You will also need one if you have employees, sell services, are a partnership or corporation, or sell alcohol, tobacco, or firearms. Additionally, if your business is involved with a farmers’ cooperative, non-profit organization, estate, trusts, or real estate mortgage conduits, you will also need a tax ID number.
However, a sole proprietor who doesn’t file pension plan or excise tax returns and is without employees doesn’t need an employer identification number. In this case, the sole proprietor’s social security number may be used as the taxpayer identification number.
Even if you don’t fit these specifications, it is still advised that you apply now to get a tax ID number. You may require one in the future, and you can save yourself delays in paying taxes or receiving refunds if you apply for it now.
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