For new business owners, one of the most important steps you have to take is to register your new company with the IRS, and make sure that you are filing your taxes correctly. Because you are earning income as a business, itâ€™s imperative that everything is done properly to ensure that you donâ€™t run into problems later. Applying for a federal tax ID is one of the first steps towards creating your new tax profile, but how do you go about it? Letâ€™s explore the world of tax IDs to see how this all works.
TIN vs. EIN
No matter if youâ€™re an individual or business, the IRS monitors your tax status through a Tax ID Number or TIN. However, when youâ€™re a corporation, itâ€™s called an Employer Identification Number because you are presumably going to be hiring employees and paying a different set of taxes. If, however, you plan on being a sole proprietorship (no workers) then you can use your current TIN, which will be your social security number (SSN).
The easiest way to apply for an EIN is to do so online. The IRS makes it relatively simple to do so, provided that you have all of your pertinent information ready. As a corporation, you are creating a separate entity from yourself. This means that you will not only need your personal data and TIN, but your articles of incorporation and any other paperwork that is related to your business. Filing online is free, and you can ask questions as you go.
One thing to note, however, is that you have to complete the application in one sitting.
Fortunately, the IRS works fast, and once your credentials have been validated, then you will get your EIN immediately. This means that you shouldnâ€™t have to check back in to ensure that youâ€™re in the system. However, if for some reason you donâ€™t get an EIN, then you can call the IRS directly and see what happened.
While there can be a lot of paperwork involved in setting up a corporation, applying for a federal tax ID is a relatively simple and straightforward process.
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