Jason, aka JJMFinance, a certified public accountant and certified treasury professional, has a passion for finances and teaching. He performs left-brain number-crunching analytics while also feeling like a right-brain handmade artist. His wife has been selling on Etsy since 2007, and he helps with bookkeeping, taxes and the legal side of her business. He built her a bookkeeping system and figured, “If my wife can use this, I’m sure other Etsy sellers could too!” Jason is here to explain the basics of an Employer Identification Number (EIN) for your small, creative business.
Did you know that there is an equivalent of a social security number that is only for your business?
Some Etsy sellers will be able to run their business just by using their social security number, but sooner or later, you will probably want to have an EIN.
The good news is that it does not cost any money to get your EIN from the IRS and it is really easy, too! You can apply online in a matter of minutes and have a PDF file of your official EIN to use.
The EIN is often requested by banks when you are creating a new business checking account. Other businesses might ask for your EIN to confirm you are a legitimate business to enter into contracts with. The IRS can use this number to identify your business specifically.
Also, having an EIN for your business improves your personal identification security. Who wants to give some random person they barely know their social security number? I sure don’t — I feel more comfortable using an EIN instead. If your business expands, you will definitely need this number when you start hiring employees.
The IRS states, “Generally, businesses need an EIN.” This is true. When you are filling out the application, you will see the question, “Did you start a new business?” from the IRS. Most Etsy sellers will look at this question and answer, “Yes.” Congratulations — you just determined you do indeed need an EIN for your business. Plus, getting an EIN will not hurt anything — if you are unsure, go ahead and apply for one anyway.
So now that you have learned about the tax law, let’s spend 10-15 minutes and do it!
- Go to the IRS website to apply for an EIN. Click on “Apply Online Now.”
- Print out a hard copy of the EIN letter with your EIN on it. Also, electronically save this file somewhere safe. Note: It takes about 2 weeks for the number to be official.
- Use your EIN whenever it is required, and feel at peace that you have the major business identification number for the IRS.
Remember, knowledge drives out fear. No one tackles all the tax code at once! Tax code is best learned step by step. I hope this baby step has taken you closer to being at peace with your Etsy shop’s taxable requirements.