Taxpayer Identification Numers for the IRS

 This is the beginning of my home business tax tips. All of the information I am sharing in this blog post is coming from the 2021 IRS Publication 583. The majority of the tax information I will be sharing over the next few weeks will be more focused on Sole Proprietorships because that is what the majority of home businesses are. There will be many tips that will also be helpful for other forms of business as well, but my focus is more on the sole proprietorship business.

 Sole Proprietorship definition from the IRS publication

 A sole proprietorship is a unincorporated business that is owned by one individual. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities. You undertake the risk of the business for all assets owned, whether or not used in the business. You include the income and expenses on your personal tax return.

 A taxpayer identification number is a 9 digit number issued by either, the Social Security Administration or the Internal Revenue Service, as a tracking number for tax purposes in the United States. Two of the most common forms of Tax Identification Numbers (TIN) are, the social security numbers that are issued by the social security administrative and the Employer identification number (EIN) that is issued by the IRS. You must have a taxpayer identification number so that the IRS can process your tax returns.

Taxpayer Identification Formats;

SSN xxx-xx-xxxx

EIN xx-xxxxxxx

Providing Your Identification Number to Others

You must include your taxpayer identification number, SSN or EIN, on all of your returns and other documents you send to the IRS. You must also give your taxpayer identification number to others who will use your identification number on any tax returns or documents that they will be sending to the IRS. This includes returns or documents filed to report the following;

• Interest, dividends, royalties, etc. that are paid to you.
• Any amount paid to you as a dependent care provider
• Certain amounts paid to you that total $600 or more per year.

 For example; If you sell more than $600 a year on Ebay, they have to report your earnings to the IRS and you will receive a 1099K. That is the same for many sites now. I know it was unusual when so many places started asking for your SSN, but the IRS required it. If you do not give these entity your identification number to these places, you may be facing penalties. 

 Employee Identification Number (EIN)

EINs are assigned to sole proprietors, LLC's, corporations, and partnerships for tax filing and reporting purposes. To apply for an EIN online go to irs.gov/businesses/small, then click on the Employer ID numbers link. The EIN will be issues immediately one the application information is validated. You can also mail or fax form SS-4. For international applications you can call 267-941-1099.\

You should apply for an EIN  early enough to receive the number by the time you must file a return or statement ot make a tax deposit. If you apply nu mail, file form SS-4 at least four weeks before you need an EIN. If you apply by telephone or through the IRS website, you can get an EIN immediately. If you apply by fax, you can get your EIN within four business days.

If you do not receive your EIN by the time a return is due, file your return anyway. Write "Applied for" and the date you applied for the number in the space for the EIN. Do not use your social security number as a substitute for an EIN on your tax return.

You should only have one EIN for a business entity. If you happen to have more than one and are not sure which one to use, contact the IRS center where you file your return.

This is some of the basics on the tax identification numbers, and information on how to get an EIN if your business requires one. There is more information about understanding your EIN in the IRS publication 1635. I hope me sharing these small bits of information will help you guys see where to begin. Sometimes trying to figure it all it is difficult, that why I am hoping to simplify some of this for anyone that has a home business.