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Any Downsides to Having an EIN?

10886 Views 12 Replies 7 Participants Last post by  slappyjoehanson, 
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As I am registering a sole proprietorship and have no employees I'm fairly certain I don't HAVE to apply for an EIN (my answer is no to all of the questions listed here: Do You Need an EIN?)

However, since it is free...I'm wondering if I should just apply anyways. Are there any downsides to having one?
Is it safer to have one and not need it then to need it and not have it?


ETA: I'm located in Michigan, if that makes any difference.
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I think you should always have one. Some companies won't sell to you unless you have one. It's also a federal requirement.

My state won't allow a state license without a EIN. Don't know of any downsides, it's a part of doing business.
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Different states may have different requirements. I can't think of any downsides and here in my state you don't need one if you have no employees or partners.

However ... you can't get a bank account in the company name without one. Not sure if thats a general banking rule or if that too is state specific. In short .. I'd get one. It takes all of 5 minutes online and its free.
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IYFGraphics
smclean06 said:
As I am registering a sole proprietorship and have no employees I'm fairly certain I don't HAVE to apply for an EIN (my answer is no to all of the questions listed here: Do You Need an EIN?)

However, since it is free...I'm wondering if I should just apply anyways. Are there any downsides to having one?
Is it safer to have one and not need it then to need it and not have it?


ETA: I'm located in Michigan, if that makes any difference.
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It puts you on the radar for the feds, by obtaining a EIN you are on the scope of the IRS, SS, and every other federal agency that has anything to do with collecting monies or governing commerce. In most cases if you are a sole-proprietor and have no employees you already have your EIN it's called a social security number.

It's always a good idea to talk to a tax attorney in your state before applying for any type of federal license like a EIN, he can tell you what is required for you state and if need be help you obtain the correct state licenses so your legit.

JMHO
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IYFGraphics said:
It puts you on the radar for the feds, by obtaining a EIN you are on the scope of the IRS, SS, and every other federal agency that has anything to do with collecting monies or governing commerce.
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That's where my mind was going. Not that I'm trying to get away with not paying taxes I DO owe...I just don't want anyone expecting more money than I have. Taxes in general make me nervous haha
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IYFGraphics
smclean06 said:
That's where my mind was going. Not that I'm trying to get away with not paying taxes I DO owe...I just don't want anyone expecting more money than I have. Taxes in general make me nervous haha
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LOL! I know what you mean, it's not just the tax aspect it's also the regulatory part like the EPA that EIN info is reported to also.....:)
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slappyjoehanson
In PA once you get set up with you EIN tax ID # you are required to file and pay on the sales tax you collect from your taxable sales each quarter . even if you did not make any taxable sales that quarter you still have to flie ....if you dont I belive a red flag goes up with your state and you will be contacted and maybe audited eventually. but its easy to pay cause its online
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IYFGraphics
slappyjoehanson said:
In PA once you get set up with you EIN tax ID # you are required to file and pay on the sales tax you collect from your taxable sales each quarter . even if you did not make any taxable sales that quarter you still have to flie ....if you dont I belive a red flag goes up with your state and you will be contacted and maybe audited eventually. but its easy to pay cause its online
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I believe most states are that way, as far as reporting "no sales" or "no tax collected" for the month or quarter, once you have a "resale permit/license" for your state you essentially become an agent for the state department of revenue in the terms of collection tax money for the state....and they do what their money! LOL!

One of the reasons for the "red flag" is that the state department of revenue is accustom to receiving money every month from every business, for a small home business you may have a month that you have no sales and they get suspicious, especially if you have three or four months in a row of great sales and lots of tax dollars sent in.

In their defense they don't know your a small home business, they just have a tax ID number, business name and address, unless they send someone out to check they simply don't know and assume your a big time brick and mortar retailer.....:)

Hope this helps.
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binki
i dont see the benefit of having the ein unless it is required by some of you vendors but even then i wouldnt think you would need it with a sole prop.

you might want to look into forming a c corp though. it offers a lot of benefits that you cant otherwise get.
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thutch15
selanac said:
It's also a federal requirement.
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EIN is not a federal requirement for a sole proprietorship. SS# works the same.
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thutch15
slappyjoehanson said:
In PA once you get set up with you EIN tax ID # you are required to file and pay on the sales tax you collect from your taxable sales each quarter . even if you did not make any taxable sales that quarter you still have to flie ....if you dont I belive a red flag goes up with your state and you will be contacted and maybe audited eventually. but its easy to pay cause its online
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Cannot speak for PA, but most places this is a requirement for being in "business" not just having a EIN. If you are a sole proprietorship you will have to file sale tax forms even if you had no sales for that quarter in this line of work. That is how they know that you had not sales for the quarter.
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I think I'm gonna get one and just be extra diligent about tracking income and paying taxes.

If I have no income one month and that's a red flag to them and they feel the need to audit me, that's fine since I have nothing to hide. It's probably safer to get audited and them realize I didn't make any money that month then to get audited and owe taxes on money I didn't report.
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slappyjoehanson
I just paid mine on the 20th... In PA apparel is not taxable item and I also do business with other companys that resell the product so I dont charge them tax because they are not the end customer. If this is situation you have to collect the required paperwork from that company and have it on file in case of an audit ....also I know alot of companys that have a seperate bank account for the sales tax they collect and they seperate that money when they get it. I dont do it this way it just all goes into my business account, but I have to admit I get stuck thinking I have more money than I really do ,then I pay my sales tax!
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