When you’re a sole proprietor or impartial contractor, there’s a great probability you’ve used your Social Safety quantity (SSN) to conduct enterprise. Whether or not you’re submitting taxes, making use of for a enterprise bank card or different normal enterprise actions, sole proprietors typically have to make use of a SSN when there isn’t an alternate.Sadly, utilizing your SSN to do enterprise opens you as much as the danger of id theft. As a substitute of utilizing your SSN, take into account signing up for an employer identification quantity (EIN) with the IRS to guard your self.What’s an Employer Identification Quantity?EINs are nine-digit numbers assigned to companies by the IRS to allow them to simply establish taxable entities. Companies like companies and restricted legal responsibility firms (LLCs) are normally required to make use of EINs so the IRS can establish them. However many sole proprietors can skate by with out them and utilizing a SSN as an alternative.Sole proprietors are typically required to make use of an EIN in the event that they:Rent employeesOpen a Keogh or solo 401(ok) retirement planBuy or inherit a enterprise that operates as a sole proprietorshipForm a partnership or LLCIf you’re a one-person operation with no plans to have interaction in any of the actions listed above, you possibly can in all probability go with out an EIN. But it surely’s essential to notice that EINs supply your id a degree of safety as properly.How EINS Can Assist Forestall Identification TheftIf you carry out providers to a shopper, you typically should present them an figuring out quantity, like an SSN, if you fill out a W-9. Whenever you present your SSN, you don’t have any management over what occurs to it, how the shopper protects it or who at your shopper’s group can entry it. If stolen, your SSN can be utilized to commit id theft, file fraudulent tax returns and extra.It’s smart to maintain your SSN as protected as potential. EINs turn out to be useful as a result of they don’t seem to be linked to your SSN. Whenever you receive an EIN, you need to use it rather than your SSN if you file tax returns, submit paperwork to shoppers and extra. On this approach, you possibly can keep away from sharing your SSN with shoppers and different entities as a lot as potential.Tips on how to Get an EINIf your principal enterprise is situated in the US or U.S. territories and you’ve got a sound SSN, you possibly can apply for an EIN on-line with the IRS. You can even fill out kind SS-4 and despatched it to the IRS by way of mail. As quickly because the IRS supplies you an EIN, you need to use it to open financial institution accounts, file tax returns by mail, apply for enterprise licenses and extra.It is advisable to wait two weeks earlier than your EIN turns into a part of the everlasting report, after which you’ll be able to file an digital return, make an digital cost or go an IRS Taxpayer Identification Quantity matching program.
How Impartial Contractors Can Use Worker Identification Numbers to Assist Forestall Identification Theft