When you establish a business in the United States, obtaining a federal tax ID from the Internal Revenue Service (IRS) is a critical step. This federal tax ID, known as the Employer Identification Number (EIN), is a unique nine-digit number assigned to every operating business in the U.S. for identification and tax purposes. Similar to a Social Security Number (SSN) for individuals, an EIN provides your business with its own identity, distinguishing it from personal finances.
Why You Need an EIN
An EIN is particularly advantageous for:
•Hiring employees
•Establishing a payroll
•Obtaining special licenses and local permits
•Opening a business bank account
As a general rule, every corporation or LLC (except single-member LLCs without employees) must have an EIN. However, not all businesses require an EIN; sole proprietorships and single-member LLCs without employees can use the owner’s SSN instead. It’s crucial to determine whether your business needs a tax ID before applying online.
Tax Benefits and Deductions
Recent changes in U.S. tax law have introduced specific deductions that businesses can take advantage of, provided they have an EIN. These tax benefits include:
•20% Income Deduction: Eligible for businesses with a gross income of less than $157,500 per year.
•30% Depreciation Deduction: Allows businesses to deduct 30% of a depreciated item’s value in the first year.
•Tax-Free Legacy Transfer: Enables passing business and financial legacy to beneficiaries without tax implications.
•Backdated Deductions: Businesses can claim missed deductions from as far back as 2014.
To qualify for these tax deductions, businesses must first apply for and obtain an EIN.
Need Assistance?
If you have questions or are unsure whether you qualify for these deductions, feel free to contact us. Our team is here to guide you through the process and help you maximize your tax benefits.
