What is Tax ID?
A Tax ID is an identifier used by tax authorities to track your tax obligations — includes EINs, SSNs, and state tax IDs.
What Is a Tax ID?
A Tax ID (Tax Identification Number) is a government-issued number used to identify taxpayers — individuals and businesses — for tax reporting purposes. For businesses, the primary Tax ID is the EIN (Employer Identification Number). For individuals, it's their Social Security Number (SSN). Every business entity that files tax returns needs a Tax ID. The ID is used on all tax forms, banking applications, and financial accounts associated with the business. The EIN Application: The IRS EIN online application is available Monday-Friday, 7am-10pm EST and processes applications immediately. If you're asked to pay money to obtain an EIN, it's a scam — the IRS assigns EINs for free.
Types of Tax IDs for Freelancers
Social Security Number (SSN) Used by sole proprietors without employees. Your personal SSN is your business Tax ID until you have employees or form an entity. Employer Identification Number (EIN) The primary business Tax ID for: - LLCs, corporations, partnerships (required) - Sole proprietors with employees (required) - Any entity filing federal tax returns State Tax ID Numbers Most states require separate registration for: - State income tax withholding (if you have employees) - State unemployment insurance - State sales tax collection Sales Tax Permit / Reseller's Permit Required if you sell taxable goods or services and must collect sales tax. Different from income tax IDs.
When to Get Each Tax ID
SSN — Always You have one. It's your sole proprietor business Tax ID if you have no employees and no LLC. EIN — Get in These Cases - You form an LLC or corporation - You hire employees - You open a business bank account (most banks require it) - You file federal tax returns for your business - You need to establish business credit State Tax ID — If Applicable - You have employees: register for state withholding - You sell taxable products/services: register for sales tax - Your state has state income tax (most do): register for state tax ID
EIN Application Process
Online (Fastest) 1. Go to irs.gov/EIN 2. Click "Apply Online Now" 3. Complete the application (typically 15-20 minutes) 4. Receive your EIN immediately upon completion 5. Save the confirmation notice (CP 575) — this is your official EIN assignment letter By Fax Complete Form SS-4 and fax to the appropriate IRS campus. EIN is typically assigned within 4 business days. By Mail Mail Form SS-4 to the IRS. Processing takes 4-5 weeks.
Using Your Tax ID
On Tax Returns - Schedule C (sole proprietors): Use your SSN - LLC, Partnership, S-corp, C-corp returns: Use your EIN On Business Forms - 1099-NEC forms issued to subcontractors: Use your EIN - Employment tax returns: Use your EIN On Business Bank Accounts Most banks require your EIN to open a business checking account. On Invoices Some businesses include their EIN on invoices for B2B documentation purposes.
EIN and Business Structure
| Structure | Tax ID Used | |-----------|-----------| | Sole Proprietor (no LLC) | Personal SSN | | Single-Member LLC | Personal SSN (or EIN if elected) | | Multi-Member LLC | EIN | | S-Corporation | EIN | | C-Corporation | EIN | | Partnership | EIN |
Protecting Your EIN
Your EIN is public information — it's on your tax returns, 1099s you file, and various business registrations. However, guard your EIN application documents: - Don't carry your EIN assignment letter unnecessarily - Don't share your EIN with strangers - Be cautious of phishing schemes claiming to be the IRS asking for your EIN
Bottom Line
Every freelancer needs at least one Tax ID — most use their SSN. Get an EIN early if you form an LLC, hire employees, or want to separate business and personal finances cleanly. The application is free and immediate at irs.gov. Keep your EIN confirmation letter safe — you'll need it for bank accounts and tax filings.