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Employee Indentification Number (EIN) and Individual Tax Identification Number (ITIN)

Americans use their Social Security Number when reporting and paying income tax. However, business entities, foreigners, and those who do not qualify for a Social Security Number must also have some form of federal identification to use when dealing with the Internal Revenue Service (IRS). The IRS uses Employer Identification Numbers (EIN) and Individual Tax Identification Numbers (ITIN) in order to track the filing and payment of business taxes and foreigners’ taxes. In order to obtain an EIN or ITIN, you must submit an application and provide the required documentation. If you need to obtain an identification number, Koontz & Parkin, CPAs can guide you through the process and ensure that all requirements are satisfied and that the number your EIN or ITIN is obtained as quickly as possible.

Do You Need an EIN?

An EIN is the business equivalent of a Social Security Number; it allows the IRS to track a company’s tax filing and payments to ensure that all employee withholding taxes are being paid, including income and payroll taxes. If you meet any of the following conditions, you are required to have an EIN:

  • You have more than one owner (excluding spouse)
  • You have employees
  • You file tax returns for employment, alcohol, tobacco, firearms, or excise taxes
  • You withhold taxes on income paid to a non-resident
  • You have a retirement plan
  • You work with trusts, estates, real estate mortgage investment conduits, farmer cooperatives, plan administrators, and non-profit organizations.

In addition, if the ownership or structure of a business changes, the owner may be required to apply for a new EIN. Whether you are starting a new business or you think your current business may need a new EIN, Koontz & Parkin, CPAs can help you apply for a number. Doing so can help you avoid future legal and tax issues resulting from unintentional mistakes.

Resident and Non-Resident Aliens May Need an ITIN

Resident and non-resident aliens may be required to file for an Individual Tax Identification Number (ITIN) in order to ensure compliance with Internal Revenue Code (IRC). Those who should apply for an ITIN include:

  • Non-residents who own, invest, or receive income from American companies
  • Foreign students
  • Foreign-born spouses and dependent children of U.S. citizens
  • Residents or non-residents not born in this country who are looking to purchase or sell property

Keep in mind that those with an ITIN are not eligible for Social Security or Earned Income Tax Credit, although if they later become eligible, Social Security benefits from payments made with an ITIN may be retroactively applied. Individuals may use an ITIN to open a bank account, but it may not be used to as proof of legal residence or right to work in the U.S.

As of June 2012, new regulations were implemented regarding applications for an ITIN. An applicant must now submit a W-7 and original documents such as passports and birth certificates or certified copies of these documents. Applicants may also submit their documents to a Certifying Acceptance Agent whose job it is to review and certify the validity of documents. Many applicants find it helpful to work with a tax attorney or CPA because applying for an ITIN requires specific documentation and working with an experienced CPA can often speed up and take the stress out of the process.

When You Need an EIN or ITIN, Call Koontz & Parkin CPAs in Sarasota for Help

Jo Ann M. Koontz and Marina Parkin offer a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing tax clients. To schedule a consultation, call the Sarasota office of Koontz & Parkin, CPAs at 941.328.3993.