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Do Sole Proprietors Need An EIN Tax ID | |
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| Do Sole Proprietors Need An EIN Tax ID | |
11/30/2010 12:00 AM
| Do Sole Proprietors Need an EIN Tax ID
When considering business taxes, you don't want to lose from the IRS so the question that sole proprietors often ask is whether or not they need to obtain an Employer Identification Number (EIN). Here's what EINs are and how they're used.
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| The thing that differentiates it from a business EIN is that it incorporates a single dash between the second and third digits. This format is automatically recognized by IRS and other computers as an EIN number.
Any person (or business,) that files taxes need a tax ID of some kind. It's the IRS way to control who's paying what to where and when. For people who are employed by someone else, such as any regular employee, their Social Security number is used. If you run a business from home as an independent contractor for some company, you also need to use an EIN. Some self-employed people in some instances may use a Social Security number can be used on the tax return. In some cases, however, you need to use an Employer Identification Number, also known as a Tax Identification Number (TIN), Federal Tax Identification Number (FTIN), and Federal Employer Identification Number (FEIN). |
| First, even though it is called an EIN, it is not only for employers. It can be used by almost any business as a business tax ID. In addition, just like a social security number, an Employer Identification Number contains nine digits. Do you have employees? | YES | You need an EIN | Do you operate your business as a corporation or a partnership? | YES | You need an EIN | Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? | YES | You need an EIN | Do you withhold taxes on income, other than wages, paid to a non-resident alien? | YES | You need an EIN | Do you have a Keogh plan? | YES | You need an EIN | Are you involved with any of the following types of organizations? - Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers' cooperatives
- Plan administrators
You need an EIN | |
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All employer businesses are required by law to pay and withhold taxes, and must have a Number and to determine the amount of Medicare-, Social Security-, federal- and state taxes to be deducted from the employees gross earnings. Half of these taxes are paid by the employee and the other half by the employer.
If your business sells alcohol, tabacco or firearms, you will have to pay additional excise taxes, so you must also have an Employer Identification Number.
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| Finally, if you form an LLC or Corporation, or you will have partners, you will need an EIN. Also, if you are an independent contractor, you will need to get a tax identification number (EIN).
Simply go online to www.businesnameusa.com for an ein purchase. Submit your business info, and pay and we will get it in 24 hours Monday to Friday. |
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Additionally, if you are not the sole owner or a sole proprietor, an EIN is needed. Partnerships and all corporation business entities are required to pay taxes at a different rate than that of sole proprietorships so they must have an Employer Identification Number even if they are not employers.
In addition, if a retirement fund (such as a Keogh plan if you're self employed) is working for the business, you'll need an EIN for your business. Also, organizations such as non-profits, cooperatives, and plan administrators must use an Employer Identification Number.
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