What Is a Taxpayer Identification Number?

• The IRS defines a Taxpayer Identification Number as a number that identifies an individual or a business for tax purposes. Your TIN as an individual is your Social Security number, issued by the Social Security Administration. Businesses, such as partnerships and corporations, have different TINs called Employer Identification Numbers. In most cases, when you form a sole proprietorship, you aren't required to obtain an EIN; revenue from your sole proprietorship is reported under your own Social Security number.
  
  

Sole Proprietor Legal Structure

• Legally, a sole proprietorship is not a separate entity from its owner. You and your business are considered the same entity, meaning that your Social Security number is the TIN for your business unless you opt to use an EIN. The IRS requires a sole proprietor to have an EIN under certain limited circumstances; for example, if you have employees or if you are involved with a nonprofit organization. Whether or not you are required to file for an EIN, you have the option to file for one if you desire.
  
  

SSN Vs. EIN

• Business situations may occur that require you to provide a TIN. For instance, if you're a freelance web developer, clients may need your TIN for tax-filing purposes. If you're uncomfortable providing your Social Security number in this context, use an EIN instead.
  
  The only potential negative to acquiring an EIN is that you may have to wait five weeks to receive it after applying, if you choose to apply by mail.
  
  

Applying for an Employer Identification Number

• It costs nothing to apply for an EIN. You can apply online or by fax, phone or postal mail. Applying online grants you an EIN immediately. You must answer questions about your business during the application process, such as the legal structure of your business, why you're applying for an EIN and what you sell or produce.