Small Business Taxes & Management

Frequently Asked Questions

Taxpayer Identification Numbers


Small Business Taxes & ManagementTM--Copyright 2003, A/N Group, Inc.


Do you need any special number to start your business? It depends. If you do business as a sole proprietorship, have no employees, don't have a qualified retirement plan, and don't need a number for state purposes or any other reason, the general answer is no. For example:

In these simple situations all the income is reported on your Schedule C of Form 1040 and there's generally no need for a federal I.D. number. (Your federal I.D. number is also known as a TIN or Taxpayer Identification Number.)

If you have employees, even if you employ your spouse in the business, (a sole proprietor is considered self employed, not an employee), you'll need a federal I.D. number because you'll have to file employment taxes with the IRS and your state. If you do business under any other type of entity (corporation, S corporation, partnership, etc.) you'll definitely need a federal I.D. number.

You may also need a number for state purposes. If you have no employees, the most common reason for getting a number is because you have to collect sales tax or you need a sales tax exemption certificate. While some states allow you to use your social security number or will issue a separate number, many use the federal I.D. number.

Having said all that, unless this is a very casual endeavor or there's virtually no chance you'll ever need a number, it probably makes sense to apply for one. Doing so will allow you to avoid problems in the future. And the IRS has made it easy. The first step is to get IRS Form SS-4 so that you know what information you'll need. You can get Form SS-4 at The instructions are at While you can file by mail or by phone (see the instructions), the most efficient way is to do so on-line. Go to,,id=97860,00.html. You'll find all the information you need to fill in the form.

Keep in mind that you may need other registration numbers from your state or local jurisdiction. That's particularly true if you have employees, or are required to collect sales tax.

A final point. If you have a federal I.D. number, be sure to use it for all business purposes. For example, for your business bank account, when asked for it by customers or vendors, etc.


Copyright 2003 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Tax laws are constantly changing.--ISSN 1089-1536

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--Last Update 12/11/03