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Employer Identification Numbers and Sole Proprietors

So you're running a business out of your basement and you see a space for an Employee Identification Number on your tax return. Do you need one? How do you get one? Read on.

Exactly who needs an Employee Identification Number (EIN)?

Also known as a Tax ID number, sole proprietors are required to an employer identification number in the following circumstances:1. If they have one or more employees.2. If they have a Keogh plan3. If they are required to file excise tax forms e.g. sales tax, alcohol or tobacco.

What if I purchase a business?

If you purchase a business for which an employee identification number is needed, use your own or get a new one. Whatever you do, don't use the EIN of the previous owner.

What if I operate more than one business?

If you operate more than one business as a sole proprietor, you should use the same EIN for each one. However if you operate businesses as a different entity e.g. Partnership, Limited Partnership, etc, you'll need a separate employee identification number for each.

How Do I Get a Tax ID Number (EIN)

This is about the simplest thing you will have to do concerning the IRS. Send IRS Form SS-4, Application for Employer Identification Number, to the IRS address in the instructions to the form. There's no excuse for not getting one as there is no charge to get an EIN.If you're reading this, you must have internet access. Use it. You can download the form, at, for free. Just print it out and send it in by mail, it should take about four weeks to receive the number. If you need to file your tax return before you receive the EIN, donít worry, just write "applied for" in the space where the EIN should go.

But I need it right now!

If you're in a rush you can also get an EIN over the phone at 1-866-816-2065, from 7:30 a.m. to 5:30 p.m. EST; howeverFree Web Content, you'll still need to fill out a paper SS-4 form and mail or fax it within 24 hours. The advantage of using this system is that you will receive the EIN immediately and you can use it on your tax forms right away.

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Jacob Wren operates Small Business Assistance - a resource site for entrepreneurs advice on obtaining an EIN and an array of other small business topics.

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