Why Do I Need a Tax ID Number?

First: Everyone needs a tax ID number, and everyone has a tax ID number. Individuals usually have a social security number (SSN) or individual taxpayer number (ITIN). These numbers are used so that they can file their taxes, and everyone has to file their taxes. But these numbers alone aren’t always enough. Some people need another tax ID number: a Federal Tax ID Number, also known as an Employer Identification Number.

If you start a business with more than one individual, you will need an EIN. You will also need an EIN if you are an employer, as this tax ID number is used to file payroll taxes. You will need an EIN if you have to pay excise taxes, such as for alcohol, tobacco, or firearm sales. And you will need an EIN to do things like open business bank accounts.

EINs allow you to have a business that is a separate taxable entity from yourself. It can also be used for certain types of investments for the same reason. An EIN can be acquired online through an EIN service in about an hour.


Written by Maurice Mallory