Tax ID EIN 101 for Photographers
As you get your photography business up and running, there's so many things to understand. The question I get a lot is what is a Tax ID or EIN number? Do I need one? What is it used for? How do I get one? Today we'll discuss when you need a Tax ID/EIN, how to get one, and what it's used for. So, let's dive in.
Are You a Business
The second that you receive money in exchange for a product or service, you have earned income. Earned income makes you responsible for taxes. So you want to start tracking the income and the expenses that go along with that income in order to understand your tax liability. When you trade cash for a private service, you become a sole proprietor. There is no registration needed. It is automatic. The name of your Sole Proprietorship defaults to your name, and your Social Security number will be the number that you'd use on any tax forms like W-9, 1099, or a Schedule C when filing your taxes.
When to Get a Tax ID
If you've decided this is something you want to do more regularly where you want to grow into a business, now is the time to figure out what you want to call or name your business and get that name registered legally, and then register for a Tax ID.
Tax ID Terminology
Before we get too far, let's review all the terms you've heard this called before. You have a Tax ID, which is short for a Tax Identification Number. You have a TIN, which is a Tax Identification Number. You may have heard of FEIN, too, the Federal Employer Identification Number. And last but not least, it's called EIN, which is short for Employer Identification Number. And this is what I'll refer to it as throughout the rest of this post. They are all the same thing. They are just different names for the same thing.
What is an EIN
Your Social Security number is the number used to identify you and all the information about you. You can think of an EIN as the Social Security number for your business. It is a number registered with the IRS that is completely connected to the business name you registered, and all the information about your business will be referred to through that EIN number. I go into a lot more detail on how to legally obtain a business name that's not your own name, (like a DBA or an LLC) in another post and video.
Filing with an EIN
While you file a DBA or an LLC on a state level, it's important to know that in an EIN, you're filing at a federal level. You file this with the IRS on their website for free. You don't have to have an EIN if you are a sole proprietor, single-member LLC, or DBA. You can just keep using your Social Security number. But who wants that floating around? If you are a multi-member LLC or partnership, you must have an EIN because you'll need that for your separate tax return at tax time.
Benefits of Having an EIN
Even though you're not required as a Sole Proprietor, DBA or Single-Member LLC to have an EIN, it's always a good idea. This gives your business its own number to use for things like filing taxes. If you want to open a business bank account, they will require you to have an EIN. If you hire employees, they will require you to have an EIN. If you want to apply for a business loan, you will need an EIN. And if you're filling out a W-9, maybe do some contract work for someone else, you'll want to have an EIN instead of your Social Security number going on it as well. You can see where having an EIN is going to benefit you so much in your business to keep everything organized and together, but also minimize the use of your Social Security number at the same time.
How to Get Your EIN
You can find the link to the IRS website here, where you can register for an EIN for free. It takes about 10 minutes, and you will have it instantly when you're done with the process so that you're all set and ready to go. I know navigating all this business stuff can be a little overwhelming, especially for creative entrepreneurs and photographers who are just passionate and want to create. So please always post any comments or questions you have below, and I will help you in any way that I can so that you can be successful.
I hope that this helped you understand Tax ID EIN 101.
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