Tax Id number
In the US, a new startup or owners of new businesses have different tax liabilities, which are most often defined by the type of business like a corporation, limited liability company, partnership etc. It is important to understand that a Tax ID for business is a mandatory requirement but at the same time, it is important to understand what it really is and why it is important for businesses.
What is a Tax ID number?
A Tax ID number in the US is also known as the Taxpayer Identification Number (TIN) or Federal Taxpayer Identification Number and is used primarily for tax purposes unlike a Social Security Number (SSN), which is used for an individual’s tax and social security benefits. One of the major Tax ID numbers and EIN differences is the issuing authority. A TIN can be assigned by the Internal Revenue Service (IRS) or by the Social Security Administration while employer identification number (EIN) is assigned only by IRS. The TIN is also a nine-digit number and is required for filing income tax returns.
Why is it important?
The Taxpayer Identification Number (TIN) is assigned to individuals and businesses in the US and they are of different types depending on the individual or business. Taxes in the US are imposed on different levels like the federal, state, and local government level and they are levied on a variety of tangible and intangible assets including property, payroll, income, sales, dividends, capital gains, gifts, estates and imports. Taxes are imposed on individuals as well as business entities, trusts, estates and other forms of organization and such individuals and organizations require a tax ID for business or individuals to file their returns.
If you are planning to start a business then you will have to apply for and obtain a tax ID for business to facilitate income returns. In fact, businesses are required to inform IRS regarding their Tax Identification numbers as well as industry codes. The tax ID is not only useful for income reporting but also for starting a business bank account, setting up a payroll, maintaining a corporate veil, preventing identity theft, and building business credit for maintaining financial stability.
Is EIN and Tax ID the same?
It is quite common for businesses or startups to wonder if there are any tax id numbers and EIN differences as TIN and EIN are both assigned for tax purposes. Just like people are identifiable using different forms of ID like Social Security number (SSN) or driver’s license numbers; similarly, Tax IDs and EIN’s are used for identification of business entities.
When it comes to Tax ID number and EIN difference then what stands out is the fact that the tax ID number TIN is an umbrella term that comprises several different types of taxpayer identification numbers and this includes EIN. So, EIN is basically a type of TIN that is specifically assigned to businesses while the Social Security Number (SSN) and Individual Taxpayer Identification Number (ITIN) are also different types of TIN that are assigned to individuals.
Do you want to save time in obtaining business EIN?