Hans Kasper, MS-CPA, PS

IRS Tax Identification Number
 

Once you have determined the best form of business for your company, you must have an identifying number so that the IRS and other agencies can process your returns.  The two most common kinds are the social security number (SSN) and the employer identification number (EIN).  An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000-00-0000.

An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00-0000000.  You will need an EIN if you intend to hire employees, operate your business as a corporation or partnership, or have a qualified retirement plan.

You can get an EIN through the mail or by telephone.  You will fill out an SS-4 form, Application for Employer Identification Number.  If you go to the IRS website at www.irs.gov you will find information about the SS-4 and how and where to file.  You can file this application ON THE WEB by clicking >>>> SS-4 application with the IRS.

If you have employees, you are required to get an SSN from each of them.  They will fill out a W-4 form at time of hiring indicating the name, address, SSN, and amount of withholding they want taken from each of their paychecks. At the end of the year, you will issue a W-2 to each employee, showing amounts paid and withheld.  If you have established any kind of deductions, i.e. 401k plans, pension plans and the like, these will also be reflected on the W-2. More about this follows in a later section.

If you make payments to someone who is not your employee and you must report the payments on an information return, such as a 1099, they must supply you with their name, address, and SSN or EIN. You can use a form W-9 to request proof of identity. 1099s are sent to the IRS at the end of the year and include the name, address, and SSN or EIN of the subcontractor, and the amount paid to him/her.  A copy of the 1099 is sent to the subcontractor, and that person must include the income earned on their tax return.

 The IRS will send you a copy of Publication 15, Circular E, Employer’s Tax Guide.  This contains all the tax tables, and various information regarding employees that you will need to know.  If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer’s Supplemental Tax Guide.  That publication has information to help you determine whether an individual is an employee or should be classified as a subcontractor.  More will be discussed about this in a later section.