An EIN (Employment Identification Number) is assigned by the IRS for businesses that have registered as any type of entity (corporation, partnership, trust). It is the number used to identify the business for tax purposes, and to allow the business to open financial accounts with the business name.
As a sole proprietor without any employees, you would never have to register for an EIN. However, I recommend that you do register for this identification number. You are probably wondering why I recommend this to you if there is no requirement to do so. My response is for your protection.
As a sole proprietor, your social security number is your identifying number for business purposes. It’s on your bank account, it’s on your tax return, it’s on the 1099s you issue (you are doing those filings, right?) If your customers are properly filing their 1099s, they are asking you for your identification number. Do you really want to give your social security number to be in compliance?
Registering for an EIN will allow you to protect your social security number by giving you an employer number associated with you instead. You won’t need to worry if your social security number is getting into the wrong hands. We have all heard stories about identity theft and the hassles associated with that when it happens.
If your identity is stolen, it can take months or years to clear up the mess. The IRS has stated that thieves often file tax returns with stolen names/social security numbers and claim the refunds prior to the individual submitting the actual return. This problem has become a serious issue for the IRS.
Protect your social security number and register for and EIN today. Go to https://sa.www4.irs.gov/modiein/individual/index.jsp to do so. If you’d like us to help you with this aspect of your business, contact us today! We can be reached at contact@abandp.com or 310-534-5577.