The 101 on your small business tax number

Death and taxes, the two certainties of life! I know tax is a pain and your small business tax number is just one part of it.

But we can really help you here. First lets talk about what this is and why it exists.

Think of your small business tax number as the social security ID of your business. It’s how the government ID’s your new business.

The correct terminology is EIN Employer Identification Number. It is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN.

Do remember that if you’re a sole proprietor you can continue to use your SSN and file personal tax returns. Today, I’m not going to get into the tax benefits and challenges of your business legal organization structure.

Do I need a Small Business tax number?

In the following cases you’ll need to apply for an EIN, (I’ll show you how to do that in a moment)

1. If you have employees
2. If your business is going to be a corporation or a partnership
3. If you withhold taxes on income
4. If you plan to file a tax return
5. If you are involved with any of the following types of organization - Trusts, IRAs, Exempt Organization Business Income Tax Returns. Estates. Real estate mortgage investment conduits. Non-profit organizations. Farmers’ coops. Plan administrators

How do I get an EIN?

Here’s the good news. It’s really easy and will take you minutes. The IRS has a great site that enables you to do this on line, phone fax or mail. the process takes minutes and is free. You can use it immediately for:

• Opening a bank account
• Applying for business licenses
• Filing a tax return by mail.

However, it will take up to two weeks before your EIN becomes part of the IRS’s permanent records. You must wait until this occurs before you can:

• File an electronic return
• Make an electronic payment
• Pass an IRS Taxpayer Identification Number matching program.

The IRS site is here

It’s good to be able to compliment the IRS occasionally, as let’s face it, they are hardly everyones favorites. But they’ve got a great application process for your small business tax number.

One of the reasons we started WDTD was the nightmare I had starting my first business ten years ago. There was little help available and I made many administrative mistakes, wasted countless hours and dollars and got very frustrated. I hope this helps you!