Do I Need a Federal Tax Identification Number?

This is a familiar question a client or possible client will ask us. Some of the more shared situations in need of a tax identification number are:

* Starting a business that will have employees

* Having a corporation

* Having a qualified retirement plan with $100,000 or more of plan assets

* Opening an estate

* Having a trust that is required to file a tax return

If you have your own unincorporated business and don’t have any employees, you are not required to have a federal tax ID number. You can use your social security number.

already if you are not required to have a tax number, you may choose to get one. Your bank may require it as a condition of opening a business bank account. Also, when you render sets to a customer, the party paying for the service is required to issue a Form 1099. To properly complete Form 1099, the customer will request information such as your name, address and social security number. If you have a tax ID number, you won’t be required to give out your social security number.

How do you get a Federal Tax Identification number? Complete IRS Form SS-4 (Application for Tax Identification Number). This number may be obtained by regular (snail) mail, fax, or online. Applying online will provide you with the number the quickest, mail will be the slowest.

ACTION ITEM: Understand when you are required to have a federal tax identification number and when it might be a good idea.

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