Understanding Tax Identification Numbers
A tax identification number, or TIN, is a unique identifier assigned to U.S. businesses and other entities, including trusts, estates, limited liability companies, partnerships, and corporations. Sole proprietorships may need this number as well under certain circumstances.
The Tax ID or EIN serves as a way to easily identify the entity similar to how a Social Security Number is used to uniquely identify individuals.
Federal vs. State Tax ID Numbers
Federal Tax ID (EIN)
In Indiana, businesses will need a federal tax ID number, also known as an employer identification number, or EIN. This is a 9-digit number assigned exclusively to your business for the purposes of identification and accounting for taxes. Businesses need an EIN for various reasons:
1) Tax reporting and payment
2) Opening business bank accounts
3) Hiring employees
EINs are required for most business structures like corporations and partnerships. You can apply for an EIN directly through the IRS website. It is a free service offered by the IRS and takes about six weeks to process.
State Tax ID (Indiana Tax ID)
A TID number in Indiana refers to a state-level Indiana tax ID. This number is also unique and is required if your business conducts operations in the state of Indiana. You will need an Indiana tax ID if you hire employees, open multiple locations, establish business credit, apply for licenses/permits, or open business bank accounts.
Who Needs a Tax ID in Indiana?
A Indiana Tax ID (EIN) Number is needed for most businesses and organizations in the state. If your business fits any of the below characteristics you will need an Indiana Tax ID (EIN):
- Have W-9 Employees in Indiana
- Operate a Indiana Corporation or Partnership
Are you starting a business in Indiana and need to apply for a Tax ID number? Applying for an Indiana EIN is a straightforward process that can be done online. The Indiana tax ID and federal EIN are both unique identifiers for tax reporting and banking. However, the state ID is only needed for Indiana activities, while the EIN is required nationally.