Taxes: Who Needs a Tax ID Number

Taxes: Who Needs a Tax ID Number
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Employer Identification Number

Who needs a tax ID number? What is really needed is what the IRS calls an Employer Identification Number or EIN. It appears from the name that employers need an EIN. In reality, a tax ID number is probably a better way to refer to this IRS generated identification number. There are a range of reasons someone would be required to obtain an EIN.

The IRS makes it easy to obtain an EIN. Application can be made by phone, fax, mail or online.

Business and Tax ID Numbers

The primary holders of taxpayer ID numbers are businesses. A sole proprietor without any employees can file taxes using her social security number as a tax ID number. The other business forms of partnerships and corporations will need to have an EIN.

Any business that has employees needs a taxpayer ID number to file and pay employee payroll taxes. An employer must pay Social Security and Medicare taxes for the employees plus pay in to the IRS income tax withholding. These payments are all done with an IRS taxpayer ID number.

A sole proprietor may still require an EIN. If the type of business requires the payment of excise tax or alcohol, tobacco and firearms tax, the proprietorship must have the tax ID. If a sole proprietor has a formal retirement plan such as a solo 401k or SEP, a taxpayer ID will be required for the business.

Other Uses of Taxpayer ID Numbers

The IRS website lists other types of organizations or legal entities that are required to have an tax ID number.

  • Non-profit organizations
  • Farmer cooperatives
  • Estates
  • Trusts
  • Plan administrators
  • Real estate mortgage investment conduits

All of these entities file tax or other reports with the IRS.

Obtaining an EIN

The IRS makes it easy for anyone who needs a tax ID number to get one. The government likes to collect those taxes!. Application for an EIN can be made by mail, fax, phone or over the Internet. Form SS4 is used to apply for an EIN but is not necessary if the application is made by phone or Internet.

The online EIN application works through an web page interview system called the EIN Assistant. It can bel a little tricky to find in the various IRS EIN related web pages so here is the link. A new taxpayer ID number will be provided immediately using the Internet application process.

The EIN online application is not available 24 hours a day. The IRS website provides hours of operation for the EIN Assistant (in eastern time):

  • Monday through Friday: 6:00 a.m. until 12:30 a.m. the next morning.
  • Saturday: 6:00 a.m. to 9:00 p.m.
  • Sunday: 7:00 p.m. until midnight.

The online application can only be used by businesses located in the U.S. or U.S. territories.


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