As a new business, you want to make sure that you’re filing your taxes correctly. If not, it could spell disaster when the IRS comes after you. However, because tax filing can be somewhat confusing, how can you be sure which tax ID number application to use? Today we’re going to discuss the difference between a taxpayer ID number (TIN) and an employer ID number (EIN).
What is a TIN?
This term refers to any tax number issued to an individual or entity. For the most part, when applying for a new number, you won’t be getting a TIN, but rather something more specific, such as a social security number for individuals or an EIN for companies.
If you are forming a sole proprietorship, however, you can apply for a secondary TIN if you don’t want your business assets (and debts) to be connected to your SSN. In this case, you can get a new number that’s different than an EIN, although it doesn’t come with all of the benefits that an EIN provides.
What is an EIN?
An employer ID number is the best way to go for forming a new business. Here are some of the reasons you may need an EIN:
- If you want to hire employees
- If you plan on forming a Keogh retirement plan
- If you sell certain restricted items (like tobacco or alcohol)
- If you are creating an LLC or corporation
This number is also useful because it allows you to open a merchant bank account and establish business credit. Overall, unless you have a particular reason not to obtain an EIN, it’s a good idea to use an EIN filing service to get one.
Fortunately, obtaining these numbers is not difficult, and you can usually receive them within a matter of hours.