Why Do I Need An EIN? – Examining The Benefits
Whether you’re running a small business or operate a single employee business, you should take the time to familiarize yourself with the importance of the EIN. The Employer Identification Number is primarily utilized for tax purposes, but it can also be very beneficial in various situations.
Within this guide, you will learn precisely why you need an EIN.
You may apply for an IRS issued certified Employer Identification Number here.
If you own a business within the United States, you will need to obtain an EIN number for tax purposes. This number is utilized to verify each employee, who pays in federal and state employment taxes.
The number of employees is not the determining factor in whether or not you need an EIN. If you have one or 20 employees that you pay withholding taxes on, you will need to apply for this very important number.
When attempting to figure out why do I need an EIN, you should analyze your own situation. For some corporations, this figure will be a requirement. This is not only true for big businesses, but also for non-profit organizations and volunteer groups.
Whether you run a church or a charity, the EIN can help to make the tax claiming and reporting process entirely easier. If you accept donations, the EIN can give you the ability to report this information to the IRS much easier.
Setting Up A Bank Account
If you’re interested in setting up a bank account, you might need an EIN. This will depend on the bank account and its purpose. Setting up an account for your own personal income can be done without this number. However, if you wish to open a bank account for your business, obtaining an EIN will be a necessity.
Avoiding Identity Theft
There is no doubt that identity theft has become an incredible and widespread problem in the past few years. Although there are numerous ways to protect your self from this problem, many experts recommend obtaining an EIN number. As an independent contractor, you will be able to give out your EIN number, instead of your social security number and this will help to reduce the risk to some degree.
Although the EIN cannot completely replace your SSN, it can in some cases and will add an extra layer of protection to your identity.
If you deal with general contractors and pay more than $600 annually for services rendered, you will need an EIN. There are many factors that determine your need for this 9 digit number and if you have any unanswered questions regarding this issue, be sure to visit the IRS website.