As a business owner, you need to know the different kinds of identification that can be accepted for different business purposes.
A Taxpayer Identification Number is a generic term used by the Internal Revenue Service to designate the types of numbers which it allows to be used for tax and identification purposes. While these numbers can be used for identification purposes,they are primarily used to track payments to individuals for federal income tax and other tax purposes.
The three general types of taxpayer ID numbers are
Individual Taxpayer ID number for people who aren’t eligible for either of two other general taxpayer ID numbers above.
What is an Individual Taxpayer ID Number ?
An Individual Taxpayer Identification Number is nine-digit number issued by the IRS to individuals who must have an identifying number but who are not eligible for a Social Security Number or an Employer ID Number. You must get a Social Security number from new employees to be used on Form W-4. An ITIN cannot be used to authorize work in the U.S. or provide eligibility for Social Security or other benefits.
More About Employer ID Numbers
The Employer ID is used for other situations in addition to reporting taxes. For example, this number may be required for business licenses and for applying for business bank accounts and business loans.
What Taxpayer ID Does a Sole Proprietor Business Use?
Since the business files and pays taxes through the owner’s personal tax return, the SSN is the only Taxpayer ID Number needed.
An Employer ID number is used by all other types of businesses, even if the business has no employees. Banks often require a new business to have an EIN before they can open a business bank account. You can apply for an EIN online at the IRS website. If you are the sole owner of an LLC, you should use your Social Security Number, not the tax ID number of the business.
What Taxpayer ID Do Individuals Use?
Most individual taxpayers have a Social Security number to use for tax purposes. An ITIN is used by foreign nationals or immigrants or their spouses. It cannot be used to verify eligibility for work or for Social Security benefits.
Does My Business Need a State Tax ID Number?
This number is issued when you register with your state department of revenue.
A credit privacy number is used in place of a Social Security Number, in some cases,to keep transactions more private. They are often marketed as helping you improve your credit rating, but that’s not true. They may have some benefit in specific situations.