Do I need a US Tax ID number or EIN? [Post/list of reasons]
A US Tax ID number or EIN is a Federal Taxpayer Identification Number that is received from the Internal Revenue Service in the United States. It’s used to identify a business entity and its payroll, financial and tax reporting responsibilities explains Aron Govil.
Taxpayers who have no employees are not required to have an Employer Identification Number (EIN), which is commonly called a Taxpayer Identification Number. However, if you have employees or plan to hire people, you will need an EIN – even if it’s just for one employee. In these cases, having an EIN can simplify your record-keeping requirements. You may also need a TIN in order to open a bank account or establish a line of credit with some lenders. Here are some reasons you may need to get this number:
Why do I need an EIN?
1. You hire employees
2. You have a side business or self-employment income
3. Your investment income is $1,500 or more per year (or $250 if you’re self-employed)
4. You work as a contractor with the federal government (you pay taxes with an EFW2 form instead of U.S Individual Income Tax Return (Form 1040))
5. You receive any type of pension or annuity or IRA distributions over $600 annually
6. Your annual tax bill exceeds $52,000 for pass-through entities (partnerships, sole proprietorships, LLCs, and S corporations)
7. You own more than 5% of a foreign company or investment or are otherwise required to file an annual report with the SEC for that entity says Aron Govil
8. Your estate has more than $600,000 in gross value at your death
9. You owe excise tax on insider stock compensation from an expatriated corporation
10. You have ownership in certain foreign financial accounts, including bank and securities accounts, and need to report their aggregate value (the FBAR form)
11. You made payments in excess of $10,000 to independent contractors/freelancers during the year (filing Form 1099-MISC)
12. You must file a return because you had any Adjustment to gross income >$600, Alternative Minimum Tax >$500, or Additional tax on qualified plans (including IRAs)
13. You had a foreign account with a balance of $10,000 or more at any time during the year and you did not file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)
14. You are required to file Form 5471 if your business is owned by an entity that is 25% owned by US shareholders
15. You must file Form 8811 to elect to report your income from IRS code 965 differently than 941/944 income
16. Your U.S company owns 50% or more of the voting stock of a foreign corporation
17. You have a non-U.S. business, trade, or professional activity
18. You are required to file Form 8938 with your U.S tax bill if you have an interest in any specified foreign financial assets that exceed certain thresholds says Aron Govil
19. A court or governmental body has imposed a levy on your assets, such as property, stocks and other investments, due to delinquent taxes
20. You are subject to the Federal Unemployment Tax Act (FUTA) – used mainly by construction companies doing business in several states
In short, you do not need a tax id for many small businesses. For those who are required to file a US tax return because their income is over the filing requirement, then yes you will need a US tax ID number (also known as an EIN). This site will explain why and when your business might need one says Aron Govil. The most common use of tax ID numbers is for reporting purposes.
If you have employees then you will likely be reporting on them via W2 forms at the end of the year. So what they get paid needs to be associated with their name and social security number. […] Filing taxes from overseas can be a daunting task. Especially if you’re caught up in the maze of rules and regulations. I’m not a tax professional (and neither is anyone else on this site), but I can tell you that many people might need to file taxes from overseas or with an EIN for other reasons such as having income from investments or selling something online (eCommerce). So what do you do?
If your income meets filing requirements and you want to file correctly and legally, then yes. Otherwise no.