Small Company Taxes - Do You Need An Employer Identification Number (EIN)?
If you run a small company or take part in self-employment tasks, you could need an Employer Recognition Number (EIN) provided by the Internal Revenue Service, whether or not you have workers.
An EIN, additionally called a Federal Tax Recognition Number, is made use of to determine a company entity for tax obligation functions.
Just how do you understand whether you need an EIN? If you answer "Yes" to any one of the following concerns, you must get one:
1. Do you have staff members?
2. Do you run your company as a firm or a partnership?
3. Do you submit any kind of excise tax obligation returns (such as alcohol, tobacco as well as firearms)?
4. Do you have a retirement called a Keogh?
So it is possible for you to possess a small business or be independent as well as not require an EIN. If you responded to all the above concerns with a "No", then you are probably a single owner or a freelance individual such as an independent specialist and considering that none of the conditions above apply, you need not worry on your own with the EIN. If that's your circumstance, you just utilize your Social Safety and security Number as your company tax identification number, which's just alright with the IRS.
Let's take a closer check out Inquiries 1 as well as 2, since it is far more most likely that you will certainly respond to those questions with a "Yes" than Questions 3 as well as 4.
Question 1: Are You An Employer?
The most typical reason for a sole proprietor to require an EIN is because you have workers and also are providing incomes, keeping pay-roll taxes (earnings tax obligation, social safety tax, medicare tax obligation), making payroll tax obligation repayments, and declaring payroll tax returns (such as Form 941 as well as Kind 940).
For EIN purposes, an employee of a sole proprietorship need to be somebody aside from the single proprietor. The single proprietor is never ever considered an employee of the sole proprietorship due to the fact that the payments you make to on your own closed profit are not considered earnings.
So if you are a sole owner and have nobody else carrying out work as a staff member for your business, then you have no workers as well as have no need for an EIN.
Concern 2: Are You A Corporation Or A Partnership?
If you ever form a company or a collaboration, you must obtain an EIN. But notice that Inquiry 2 makes no mention of the minimal responsibility company (LLC), which has actually become a progressively popular choice of entity kind.