When you start a business, you need to file all kinds of different tax forms, and to identify your business to the IRS, to banks and to a variety of other institutions, you need a tax ID number. Wondering how to get a tax ID or Employer Identification Number (EIN) for an S-corporation? Then, keep reading for more tips and details.
Steps to Applying for an S-Corporation Tax ID (EIN) Number
- Prepare Business Owner Information
- Apply for an S-Corporation Tax ID (EIN) Number Online
- Apply for an S-Corporation Tax ID (EIN) Number by Phone, Mail or Fax
- How Do I Get a Tax ID Number for an S-Corporation?
- What Is the Difference Between an LLC and an S-Corporation?
- Why Do I Need a Tax ID for an S-Corporation?
To apply for an S-corporation tax ID (EIN) number online or by phone, mail or fax, you first need to prepare business owner information. To ensure the application process goes as smoothly as possible, make sure that you have your personal information including your Social Security number (SSN), address and phone number, and if your business has multiple owners, include their information as well. You also need some details about the business’s name and activities.
Although you can apply for an S-corporation Tax ID (EIN) number by phone, mail or fax, the fastest and easiest option is to apply online. You can complete an online application fairly quickly, and in most cases, you even get your tax ID number the very same day. Once you have your tax ID number, you can start using it on employee tax forms and other documents your S-corporation needs to complete.
Alternatively, you can apply for an S-corporation tax ID (EIN) number by phone, mail or fax. You can only apply for an EIN over the phone if you are an international applicant, and in fact, if you reside in another country or if the business is headquartered outside the United States, applying over the phone may be your only option. If that doesn’t apply to you and if you don’t want to apply online, you can choose between fax or mail. As long as you provide all the essential details and a return fax number, you can receive a Federal EIN for your S-corporation over fax within four business days. If you apply by mail, you should receive your tax ID within about four weeks.
Still wondering, “How do I get a tax ID number for an S-corporation?” As indicated above, you may be able to apply over the phone. However, in most cases, you need to apply by fax, through the mail or online. The fastest and easiest option is to apply for an S-corporation tax ID online.
A Limited Liability Company (LLC) is a business structure that establishes the business as a separate entity than the owners. When you opt for this business structure, you ensure that you are not personally liable for the business’s debts or other liabilities. LLCs are a relatively flexible business structure – you can have single or multi-member LLC’s or series LLCs, which consist of a parent business with a number of sub-LLC’s.
Typically, single-member LLCs are taxed like sole proprietorships, while multi-member LLCs are taxed as partnerships. However, these businesses can also opt to be taxed as S-corporations. Unlike an LLC, an S-corporation is not a business structure. Rather, it’s a tax election.
When an LLC is taxed as a sole proprietorship or a partnership, the business’s income and expenses get passed directly to the company’s owner. For instance, if a single-member LLC has $100,000 in revenue and $20,000 in business expenses, the owner reports those amounts of their personal tax return, and they have $80,000 in personal income. They must pay Medicare premiums and Social Security contributions on that entire amount.
On the other hand, if an LLC elects to be taxed as an S-corporation, that changes how the income is taxed. In this situation, the LLC pays the owner a salary. To continue with the above example, let’s say the LLC still has $100,000 in revenue and $20,000 in business expenses, but it also pays a $60,000 annual salary to the owner. The LLC pays Medicare premiums and Social Security contributions on the salary, and the business owner pays those amounts as well. Note that in the above scenario, the owner paid both of these amounts out of their personal income.
After subtracting the owner’s salary and the business’s expenses, the LLC has $20,000 remaining in profit. The owner has to report that amount as income on their tax return, but although they may face income tax, they don’t have to worry about Social Security or Medicare taxes on those profits, thus lowering their tax liability.
Having your LLC taxed as an S-corporation can save you money, but corporations generally face more paperwork and reporting requirements than traditional LLCs. Keep in mind that you usually need to decide if you want your business taxed as an S-corporation in the early days after you launch your business. You may want to consult with a business specialist to determine which business structure and which tax elections are right for you.
As explained above, when you have an S-corporation, you report the business’s profits on your own tax return, just as you do with a sole proprietorship or a partnership. You don’t have to file a corporate return like you do if you have a C-corporation. As a result, you don’t need a business Tax ID for your income tax return. In light of that, many people wonder, “Why do I need a tax ID for an S-corporation?”
Well, you need the tax ID or EIN, for any tax forms that the business itself needs to file. That includes sales and excise tax forms as well as employment tax forms so you can remit Social Security, Medicare and income tax on behalf of your employees. The S-corporation may also need the tax ID for select income tax schedules and estimated tax forms.
However, you don’t just use S-corporation tax ID numbers on federal tax forms. You may also need this number when applying for business loans, opening bank accounts, or doing other financial transactions with your business.