If you are a business owner in Hillsborough, or anywhere in the United States, you are legally required to obtain a federal tax ID prior to conducting any commercial operations. This ID is a nine-digit number that is given to you by the IRS and is used to not only identify you like a social security number identifies an individual, it also is used to classify how your business is taxed and what federal regulations apply to your business. Your federal tax ID is also called an employer identification number (EIN) and is generally not the same as your state tax ID number.
Nearly all businesses in operation need to apply for a tax id number (TIN) while at the time they establish their business entity. If you have employees on your payroll, you must file with an EIN as that’s the number your employees use to identify your business on their tax forms. There are a few exceptions to requiring an identification number, which we will explain below.
If your business entity is established as a sole proprietorship, you can use your SSN or individual taxpayer identification number (ITIN) to identify your business when you do your taxes. Sole proprietorships do not separate business from personal income when filing taxes, so if there are no employees, you don’t need a separate EIN. However, any sole proprietorship with employees who aren’t independent contractors have to file for an identification number.
If you own a limited liability corporation without employees, you can use his or her social security number.
Even if you don’t have workers on your payroll, tax exempt organizations in Hillsborough should apply for a tax identification number. This way, if you do have a situation requiring an EIN, you’ll have it ready and won’t face a setback.
It’s free to apply for your tax ID number, though you may encounter fees when you establish your business entity. Also, your ID never expires, and it never changes.
To apply for your Federal Tax ID number, fill out IRS Form SS-4, which is available on the IRS website. However, before you apply, we suggest working with an experienced Hillsborough C.P.A. to help you with your application and make sure the information is correct. Mistakes can hold up your application process for several weeks, which puts you behind in your business.
Registering your business entity and filing for your federal tax ID may be overwhelming and confusing, especially because, once processed, it’s difficult to make changes. Having an experienced CPA on your side as you go through the process can help you get your business off the ground more easily.
At C.E.Thorn, CPA, PLLC, we have over 25 years of experience in small business accounting, and businesses in and around Hillsborough turn to our financial services to help them prevent costly tax issues. To learn more about how we can help your small business, contact our team today by completing the online contact form or by calling 919-420-0092.