What Is A Taxpayer Identification Number? A Guide for Entrepreneurs

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What Is A Taxpayer Identification Number? A Guide for Entrepreneurs

The number of applications for new businesses reached levels not seen since 2007. The pandemic left many looking for creative ways to generate income.

Many people choose to start a new business. If you’re one of them, you know it’s a wonderful challenge to take on.

As you go down your business startup checklist, you’ll notice there are several items that relate to registering your business. One of them is getting a taxpayer identification number.

What is a taxpayer identification number?

Keep reading to find out what a tax ID number is, if you need one, and how you can get one.

What Is a Taxpayer Identification Number?

A taxpayer identification number is a nine-number code that you use on all tax-related documents. The IRS uses this number to match your tax return with other tax records.

The taxpayer identification number is also used when you claim benefits like Social Security or health benefits.

Everyone has to have some form of taxpayer ID number. The IRS requires this on all tax returns and other documents, such as W-2 forms.

Types of Tax ID Numbers

The most common taxpayer ID number is your Social Security number. You use this on all of your tax forms, to get a job, open a bank account, and apply for credit.

What if you can’t get a Social Security number? You might be a non-resident or resident alien, but you still have to file taxes.

In that case, you can get an Individual Taxpayer Identification Number (ITIN).

If you use a tax preparer to do your taxes, they have to have a Preparer Taxpayer Identification Number (PTIN).

Do you plan to open a business as an LLC or hire employees? You’ll need to have an EIN, which is an Employer Identification Number.

Banks require an EIN to open a business bank account. The IRS looks for your EIN to ensure that you’re paying the proper amount of payroll taxes.

One other IRS tax ID number is the ATIN. That’s used for taxpayers in pending adoptions. This is a temporary number that’s used until the adoption is completed.

The Social Security Administration issues Social Security numbers. All other taxpayer identification numbers get issued by the IRS.

Checking Your Taxpayer ID Number

It’s critical to check your taxpayer ID number. Any errors result in delayed tax refunds and questions from the IRS. Issues could result in a rejection of your tax return.

For employers with contractors, you could face fines up to $280.00 if you submit mismatched information to the IRS. This article at https://efile360.com/ explains how to match taxpayer ID numbers to avoid these penalties.

The Importance of a Taxpayer ID Number

What is a taxpayer identification number? It’s a nine-number code that’s issued to every taxpayer. The IRS uses that number to verify income and information on tax returns.

You can get a taxpayer ID number from the Social Security Administration or from the IRS. Make sure you get the right one for your situation and verify the number is correct on all tax documents.

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