An employer identification number is a good thing to have as you prepare your home business taxes.
Tax season will be here again before you know it. As you consider what’s next for your home business taxes, think about whether or not you have an employer identification number (EIN).
Your EIN is the taxpayer identification for your business. If you don’t have one, seriously consider applying for one.
Why an EIN is a Good Idea
I’m a big believer in the idea that you should keep your home business finances separate from your personal finances. I think that even if you are a sole proprietor it’s a good idea to keep things separate, opening a business bank account. And, in order to open a business bank account, you usually need an EIN from the IRS.
There are other reasons that applying for an EIN is a good idea:
- If you are a freelancer, you can give out your EIN, rather than your Social Security number on W-9 forms. As an independent contractor, you fill out a lot of W-9 forms. Do you really want your personal SSN on all of them?
- Sets you up to hire others. When you hire employees for your home business, you will need an EIN in order to fill out the paperwork. Getting it now puts you ahead with your home business taxes.
- Provides you with a way to build credit as a business. You can provide your EIN when engaging in business credit activities, helping to build your business credit separately from your personal credit.
It’s not very hard to apply for an EIN. The IRS makes it fairly easy and straightforward to apply. You can even do it online. Once you have your EIN (and you might even be issued it the same day), you can use it to open a business bank account, to give out on paperwork, and to use as part of your business credit report.