Did you know that taxes are inevitable in the world of business?

Actually, most startups require more than one tax identification numbers such as the federal employer identification number, State taxpayer identification number, and State unemployment insurance employment account number or others.

You must obtain a new tax identification number every time for of your business.

Furthermore, when purchasing an established business, you will need to apply for new tax identification numbers.

What is tax identification number (TIN)?

Just as you require an identifier to differentiate you from other people; your business requires an identifier to separate it from the others. However, most business owners do not understand the need for a separate tax identification number (TIN) in their business operation. The need highly vary depending on the type of company and the purported business activities.

The tax identification number is primarily a nine digit ID, which government authorities use to identify individuals and businesses. The other name for individual tax identification number is the Social Security Number. And the other name for business entity tax identification number is the (EIN) or simply Tax Identification Number (TIN). What do I mean with that? SSN is a form of tax identification number, but tax identification numbers are not always social security numbers.

The main purpose of a TIN

Government authorities introduced the TIN with one main goal: to permit business owners to file tax returns on behalf of their businesses. When filing taxes on behalf of your business, you must include the number on your tax forms. Mostly, banks will demand theTIN when opening an account in your business name.

Customers and suppliers might also ask for the tax TIN when establishing an account with your business or cutting a check – they do that for taxation reasons.
If you are running a sole proprietorship form of business, the SSN is same as theTIN for the sole proprietorship. If you are starting a sole proprietorship type of business, your personal Social Security number will cover your business activities automatically – you and your business are the same thing. But when setting up any other type of business such as a partnership or corporation, you should remember to apply for separate tax identification number. Partnerships involve two or more owners and therefore the business cannot use the Social Security Number of one owner. Corporations are unique entities separate from their owners.

Up to this point, you already know that you do not require a tax identification number to run a sole proprietorship. However, you will require it if you are planning to hire employees. Without EIN, you will not be able to pay your workers’ employment taxes. The EIN shows on every yearly W-2 of your employees. Businesses that associate with particular types of organizations such as farmer’s cooperatives, some types of trusts and nonprofit organizations will require EIN.
In some states, small businesses must apply for separate state-issued identification numbers. For example, if you are planning to set up a “>pool remodeling business in Thousand Oaks, California, you will have to apply for California Taxpayers ID number. It will be of assistance when filing for California Franchise Tax. When hiring individuals, you should use the state-issued business ID number. You will also need to use it when paying state employment taxes on your workers behalf.

Applying for a federal employer identification number

If you are a sole proprietor not intending to higher workers, to file information returns, you have no retirement plan for yourself, or not intending to pay federal excise taxes associated with your business, you do not need a separate tax identification number. You can generally use your social security number, known as the Federal Tax Identification Number (FTIN). A single member limited liability company desiring to file taxes as a sole proprietorship form of business, may also follow the rule.

Any other form of business have afederal employer identification number. To do that, you should file Form SS-4 with Internal Revenue Service. Independent contractors doing residential or commercial building improvement or constructions in private or public sector, including pool plastering and remodeling businesses, require tax identification number for employees’ compensation purposes.

You can obtain the Form SS-4 from IRS. To get it, you need to contact the IRS through the phone number they have listed on the Resource Directory. You can also print the form and the instructions directly from the IRS website at Forms and Publications.

Most people apply for the federal employer identification number by fax, online or by the United States mail. You can complete the application and get the number for immediate usage. Use the IRS website. On the website’s homepage, navigate to the Apply for an (EIN) online. To apply through fax, dial 859-669-5760. Mail applications will take around 4-5 weeks.

The (IRS) uses Tax identification Numbers (TIN) in tax laws administration. You can only get the number through the IRS or through the Social Security Administration (SSR). The SSA issues the Social Security Number while the IRS offers all the other TINs.

Taxpayer Identification Numbers you might need to consider when setting up any type of business such as a pool contractor:
– (SSN)
– (EIN)
– (ITIN)

The numbers that the IRS assigned previously are not valid anymore.

Why you need the Tax identification number in your business

You must furnish a TIN on statements, returns, and any other tax related document. A quick example: you must furnish the number when claiming treaty benefits and filing tax returns. The TIN should be on withholding certificates if the beneficial owners are claiming tax treaty benefits other than income form a marketable security, exemption a particular annuity or exemption for an effectively connected income.

When do people use the Social Security Number (SSN)?

Generally, you will need to list the SSN of all people for whom you are claiming an exemption on your personal income tax return. If your spouse or dependent does not have the number or are not eligible to have one, yu have to list the ITIN – not the SSN. If a child was born and died on the same year, the SSN or the ITIN is not important.