Every day companies share the owner’s personal information, including Social Security Numbers (SSN), personal names, and home addresses. This kind of information is vulnerable to identity theft and not protected in the business world. Fortunately, there is a safer way to go about this.
Instead of using the SSN as your Federal Tax Identification Number (TIN), you can use an Employer Identification Number (EIN). This better protects you, your business, and your commercial dealings with others.
Keep reading to learn more about the benefits of using an EIN.
Sole proprietors, smaller family-owned businesses, and Single-Member LLCs typically use their SSN as their TIN. When the SSN is used as a TIN, all the protections of federal or state privacy legislation are lost as privacy legislation is designed to protect individuals, not companies. Company information does not have the same protections as personal information, even when it is your personal SSN. Companies that use the owner’s SSN for business identification are freely and willingly sharing information that can be used for identity theft and is no longer protected under these federal or state privacy laws.
Privacy protection of a SSN is meant to reduce personal identity theft, protect your personal assets, and keep information confidential. If your SSN or personal information is compromised at any time, replacing the number, and correcting the damage can be a time-consuming and administrative nightmare. If you are still using your SSN as a TIN, this brings unnecessary risk to you personally. Fortunately, there is a simple and quick alternative to protect your personal information – the EIN.
Individuals can eliminate their risk of sharing personal information via the business by using an EIN instead of an SSN. EINs are provided free of charge from the IRS and are used by companies to protect the privacy of an owner’s SSN and other personal information.
An EIN is the most used TIN by companies who employ individuals. However, you do not need to have employees to utilize an EIN. An EIN is not linked or associated with your SSN. As such, it provides additional personal privacy protection by using a different number than your SSN for reporting purposes. You can easily apply online for the EIN through the IRS.
In addition to privacy, there are other advantages to obtain an EIN. You may discover later that you need one – mainly if you plan to expand or restructure your business to a corporation and/or hire employees. If you form a corporation later, you will need an EIN. You also need an EIN when your organization issues employee-related tax forms, such as W-2s. Employers are required to issue W-2s to their employees after the end of each tax year. All payroll-related reports contain your EIN – including monthly, quarterly, and annual tax forms, whether completed by your business or another provider. Not only will your business need an EIN for various purposes, but your employees will also need it when they prepare their tax returns.
Here is how you can get your EIN:
How long does it take?
Other common tips to protect your SSN:
Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel concerning their obligations and use of PlusOne Solutions services.
About PlusOne Solutions
PlusOne Solutions has been an industry leader in the risk management field by specializing in compliance programs that meet the complex challenges of geographically dispersed contractors, vendors, and employee networks. PlusOne Solutions protects companies from possible financial, legal, and reputational risks associated with contractor and vendor relationships while creating safer work environments. To learn more, visit https://www.PlusOneSolutions.net.
To receive these updates directly in your email inbox, sign up for the newsletter.
Interested in learning more about our compliance services? Contact us at (877) 943-0100 or send us a message using the form below.