If you have any employees, the IRS requires that you use an EIN. Only disregarded entities-those the IRS does not deem legally distinct from the business owner-can file taxes with an SSN rather than an EIN. The IRS requires most businesses-corporations, partnerships, most LLCs, and some sole proprietorships-to use an EIN. Similar to SSNs, no two EINs are the same. An EIN uses the format XX-XXXXXXX rather than the SSN format of XXX-XX-XXXX. However, the format is slightly different. Similar to an SSN, an EIN is a nine-digit series of numbers. An EIN identifies the tax account for the business like an SSN identifies the tax account for an individual taxpayer. The IRS uses EINs to legally separate a business entity from its individual owner or owners. When you receive your Form W-2, Wage and Tax Statement from your employer at tax time, your SSN will be on the form. It links the information directly to your SSN. Form W-4 gives your employer the information they need to submit your wages and pay your taxes to the Internal Revenue Service (IRS). When you start a job, your employer requests that you fill out a Form W-4, Employee's Withholding Certificate. Paying taxes on business income or a side gig is somewhat different than paying taxes as an individual taxpayer.Īs an individual taxpayer, your tax account is directly linked to your Social Security number (SSN).
If you own a small business or have a job in the gig economy, it is important to understand how to pay taxes on that income.
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