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Sole-Proprietors, Prevent Identity Theft by Getting an EIN!
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| by Ellen Zucker |
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 Obtaining an EIN or employer
identification number is a good idea if you are a
sole-proprietor.
From time to time, you'll be asked to provide your social
security number or employer ID to clients or governmental
agencies. Once you do that you have no control over which
client employees and others can view your number.
With identity theft an ever increasing problem, reducing
the need to give out your social security numer can only
be a good idea.
The best way to do that is to have an employer
identification number.
In fact, having an EIN is mandatory for almost any
business that is set up as something other than a
sole-proprietorship.
This is the IRS checklist for businesses that are
required to have an Employer Identification Number.
• You have employees.
• You are set up as a corporation or partnership.
• You file tax returns for Employment, Excise, or
Alcohol Tobacco and Firearms.
• You withhold taxes on income, other than wages, paid
to a non-resident alien.
• You have a Keogh plan.
• You are involved in a trust. (There are some
exceptions, check the IRS site).
• You are involved in one of the following types of
organizations: Estates, real estate mortgage conduits,
non-profits, farmer's cooperatives, and plan
administrators.
Sole-proprietors are not required to have an EIN. But if
you are a sole-proprietor, I strongly recommend getting
one.
The reason? If you are a sole-proprietor, clients who pay
you $600 or more in the course of a year must file a 1099
on your behalf. And they need your social security number
or employer identification number to do that.
And you, in turn, are required to do the same for your own
sole-proprietor subcontractors who receive $600 or more in
payments from you.
The Employer's ID number fulfills IRS's requirements when
filing your 1099s, so you just substitute the EIN for the
social security number.
The process is easy and straightforward.
You can apply for your EIN number online at the IRS
website (www.irs.gov) or
ask the IRS to have the forms sent to you.
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| About
the Author: Ellen Zucker's site http://www.selfemployment101.com,
provides helpful articles and resources to help the
creative sole-proprietor earn a living and create a life. |
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