An Employer Identification Number (EIN) is a number assigned by the Internal Revenue Service for federal tax purposes explains Aron Govil. The purpose of an EIN is to identify one business entity and its financial accounts for legal, economic, and tax-related transactions.
The IRS requires businesses to report their earnings or losses on form 1099K if they have received $20,000 or more in credit/debit card payments or grossed $20,000 total during any year. If you are expecting income from sources other than credit/debit cards this year then you will need an EIN to receive your money. An EIN also helps protect your vital personal information; similar Social Security numbers can be used multiple times which puts your identity at risk. If you have employees, then you will need an EIN to report payroll taxes to the IRS and avoid penalties.
In addition, if you plan on contracting with a third party, such as a bank or client, they may require your EIN for their records since it is required from businesses by law. You can apply for an EIN online or at a local office where you file business documents. The second option offers expedited service which must be scheduled ahead of time and may have a fee associated with seeking help from a person in person rather than filing online.
A full list of situations when an individual would need an EIN is as follows: opening a bank account accepting credit cards as a form of payment applying for a loan paying employees opening a business checking account filing a 1099-K form with the IRS “The Internal Revenue Service is phasing in the enforcement of a law requiring companies to obtain an Employer Identification Number for each person they pay $600 or more during the year.”
If you are interested in finding out if your company needs an EIN then please follow this link to our free online service. Aron Govil says if you receive one of our “Do You Need an EIN?” letters and do not expect to use an EIN this year we will delete your
If you are a sole-proprietor business or have a single-member LLC that does not elect to taxation as a corporation, you automatically receive what calls as a “filing extension”. This means that your taxes do not have to be file until six months. After the end of your fiscal year. If you bring in any sort of revenue during the year, complete and file Form 1040-ES with the IRS by April 15th of next year. Otherwise, it is important to obtain an Employer Identification Number (EIN) from the IRS. Because it allows businesses to open accounts at financial institutions such as banks and credit unions. It also becomes necessary when filing sales tax returns in most states. An important distinction here is that when you apply for an EIN, you are not being taxed. You are simply collecting the information necessary to file your taxes.
Additionally, if you have employees, you will need this number. In order to withhold federal income tax and social security tax from their paychecks. Keep in mind, however, that even sole proprietors require to pay Social Security on themselves! The IRS website also recommends applying for an EIN. If you plan on opening a business bank account with a small number of funds (as low as $100).
Another important consideration is that while some banks require. That new accounts be open in person, most will allow you to open an account by phone or online. If you have any questions about whether or not you need an EIN. It is best to consult with a tax professional or the IRS directly explains Aron Govil.
Obtaining an Employer Identification Number (EIN) from the IRS is important for businesses of all sizes. Some reasons why you may need this number include: filing sales tax returns. Withholding federal income tax and social security tax from employee paychecks, and opening a business bank account. The IRS website provides detailed instructions on how to apply for an EIN. And recommends doing so if you have any questions about whether or not you need one. Keep in mind that even sole proprietors are require to pay Social Security on themselves! If you are a business owner, it is important to familiarize yourself. With the various tax requirements in order to avoid any penalties.
If you are a business owner, you may need an Employer Identification Number (EIN) for a variety of reasons. Including filing sales tax returns, withholding federal income tax and social security tax from employee paychecks. And opening a business bank account says Aron Govil. The IRS website provides detailed instructions on how to apply for an EIN. It is important to consult with a tax professional or the IRS. If you have any questions about whether or not you need one. Keep in mind that even sole proprietors are require to pay Social Security on themselves!