What Exactly is a Tax ID Number Used For?
Though Social Security Numbers are the most common kind of tax ID number, the next most common is the Employer Identification Number. The EIN number is needed to start a business. These numbers, issued by the IRS, allow the IRS to monitor all tax activities of the company.
Other types of tax ID numbers are paid tax preparer identification numbers (PTINs) and adoption taxpayer identification numbers (ATINs), both of which are needed by relatively few people but serve a similar purpose for those individuals.
Whatever type of business you operate, you will need a taxpayer ID for each legally separate enterprise, in order to be accountable to the IRS.
Why is tax ID important?
The simple answer is this: It’s a must have, or else.
While EINs are required to meet your company’s tax responsibilities, they are also needed to complete other actions related to your business, such as applying for credit in the company name or opening accounts. State laws may obligate a business to acquire and provide an EIN number for different licenses or permits related to the type of company.
What Are the Differences?
Whether obtaining an EIN for a corporation or for an LLC, there are a few differences. Those for corporations allow more flexibility in conducting international business, but an LLC tax ID number allows for more options related to ownership structure and includes few limits on the ways taxes are filed, and sometimes how they’re paid.
A tax ID number, also known as a taxpayer ID or federal tax id number, identifies a business, individual, or other legal entity for any tax-related purpose, such as particular tax laws related to various kinds of legal entities, or that is relevant to the Internal Revenue Code.
To meet IRS requirements, you’ll need to complete an IRS SS-4 document, including your nine-digit EIN number. Though this process can be complicated and time-consuming, the knowledgeable staff at IRS-EIN are able to make this a painless process.
Compliance with the local laws and regulations is a must-do for your business. You can get started by obtaining a new tax ID.
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