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What is a Tax ID Number?

When you’re starting a business, one of the first things you’ll need to get is a Tax ID Number. But what exactly is a Tax ID Number, and how do you get one?

Blog Author - Justworks
Justworks
Oct 17, 20244 minutes
Blog Author - Justworks
Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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1920x1080 IRS Form 941 The Basics
Table of Contents

Understanding the Basics

Types of Tax ID Numbers

How to Obtain a Tax ID Number

Tax ID Number vs. EIN

Common Questions

Maintaining Your Tax ID Number

Next Steps

Justworks Can Help

When you’re starting a business, one of the first things you’ll need to get is a Tax ID Number, also known as a TIN. It’s not just a formality—your Tax ID Number is essential for all sorts of activities, such as filing taxes, opening a bank account, and even hiring employees. But what exactly is a Tax ID Number, and how do you get one? In this article, we’ll break down everything you need to know about requesting and maintaining a Tax ID Number for your business.

Understanding the Basics

What is a Tax ID Number?

A Tax ID Number, or TIN, is a unique identifier used by the Internal Revenue Service (IRS) to keep track of businesses and individuals for tax purposes. Think of it like a Social Security Number (SSN), except for your business. There are a few different types of Tax ID Numbers, but the most common one for businesses is the Employer Identification Number, also called an EIN.

Why Do You Need a Tax ID Number?

Having a Tax ID Number is crucial for several reasons:

  • Filing Taxes: You’ll need your number when you file federal and state taxes

  • Opening a Bank Account: Most banks require a TIN to open a business account

  • Hiring Employees: You can’t legally hire employees without a TIN

  • Applying for Business Licenses: Many licenses and permits require you to have a TIN

Types of Tax ID Numbers

Employer Identification Number (EIN)

The EIN is the most common Tax ID Number for businesses. It’s a nine-digit number assigned by the IRS, and each one is completely unique. You’ll need an EIN if you:

  • Operate your business as a corporation or partnership

  • Have employees

  • File employment, excise, or alcohol, tobacco, and firearms taxes

  • Withhold taxes on income, other than wages, paid to a non-resident alien

For a more in-depth explanation, check out our blog post about Federal EIN Numbers.  

Social Security Number (SSN)

For sole proprietors and single-member LLCs, your SSN can also serve as your Tax ID Number. Even so, using an EIN instead of your SSN can be a good idea, because it helps keep your personal and business finances separate—kind of like having different email addresses for work and personal contacts.

Individual Taxpayer Identification Number (ITIN)

An ITIN is a tax processing number for people who aren’t eligible for an SSN but need to file taxes. It’s mostly used by non-resident aliens and their spouses or dependents. If that’s not you, then you probably don’t need this form of TIN.

Adoption Taxpayer Identification Number (ATIN)

An ATIN is a temporary TIN issued for a child in the process of adoption who can’t get an SSN right away.

How to Obtain a Tax ID Number

Applying for an EIN, Step by Step

  1. Determine Your Eligibility: You need a valid Taxpayer Identification Number (for example, an SSN or ITIN) to apply

  2. Apply Online: The IRS website offers an online application for EINs

  3. Complete the Application: Fill out the required information about your business.

  4. Submit and Receive Your EIN: After completing the application, you’ll receive your EIN immediately. The best part? The whole process is free

Applying by Mail or Fax

If you’d rather not apply online, you can also do it by mail or fax. Just fill out Form SS-4 and send it to the appropriate IRS office. Compared to applying online, this way takes a little longer—usually four business days.

Using a Third-Party Service

Third-party services can help you get an EIN for a fee. While this can save time, it’s usually not necessary since the online application is straightforward and free of charge.

Tax ID Number vs. EIN

You might be wondering about the difference between a Tax ID Number and an EIN. Good question! Essentially, an EIN is a type of Tax ID Number specifically for businesses. The terms are often used interchangeably, but it’s helpful to know that a Tax ID Number can also refer to other identifiers like SSNs and ITINs. 

Common Questions

1) Do All Businesses Need an EIN?

Not all businesses need an EIN. Sole proprietors and single-member LLCs (without employees) can simply use their SSN instead. However, getting an EIN is still a good idea if you want to keep your personal and business finances separate.

2) Can I Use My EIN Instead of My SSN?

Yes, you can use your EIN instead of your SSN for business transactions and tax filings. This is also a good way to keep your personal information safe and limit the number of people who have access to your SSN.

3) Is There a Fee to Obtain an EIN?

No, the IRS provides EINs for free. Be cautious if you run across a third-party service that offers to get you an EIN in exchange for a fee. You’re not required to work with one of these services, and the IRS website offers all the information you need to go through the application process by yourself, free of charge.

Maintaining Your Tax ID Number

Keep Your Information Up to Date

Your EIN belongs to you for life, so it’s essential to keep your business information current with the IRS. If you change your business name, structure, or address, you’ll need to to write to the IRS—via email, mail, or fax—to update your records.

Secure Your EIN

Treat your EIN like any other sensitive information. Share it wisely, and keep it secure to prevent identity theft and unauthorized use. Use caution if someone you don’t know asks for your EIN, just like you would with your SSN or bank account number.

Next Steps

A Tax ID Number is a crucial part of running a business. Whether you’re a sole proprietor or running a corporation, understanding and obtaining the right Tax ID Number will help you comply with tax laws and manage your business more effectively. Plus, it’s free and relatively simple to apply for an EIN, the most common Tax ID Number used by businesses.

By following the steps above, you can easily obtain your Tax ID Number and set your business up for success. If you have any questions or need more help, talk to a tax professional to make sure you’re on the right track.

Justworks Can Help

Starting your small business can be a big challenge—especially when it comes to navigating confusing topics like Tax ID numbers and EINs. But you’re not in this alone. Justworks is here to help at every step of your journey, whether you’re about to launch your business or ready to take it to the next level.  We also offer best-in-class tools to help you manage areas such as Payroll, Time Tracking, and People Analytics, so you can spend less time on paperwork and more on what you do best—building your business. To learn about everything Justworks can do for you and your team, begin your journey here!

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Justworks
Oct 17, 20244 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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