Side Hustle Essentials: Do You Really Need a Tax ID Number?

So you’ve got a side hustle. And you might be wondering if you really need a tax ID number, also referred to as an EIN. In this blog post, I’ll discuss whether or not you should get an EIN or employer identification number for your side hustle business.

An EIN is a nine digit number assigned to sole proprietors, corporations, partnerships and LLCs for tax filing and reporting purposes. It’s a permanent number issued by the IRS, and that is how they identify your company. An EIN may also be called an FEIN or Federal Employer Identification Number. Just know it’s the same thing.

It’s important to determine whether you need to get a tax ID number or EIN, for your side hustle. As a side hustle business owner, you’re most likely taxed as a sole proprietor.

And, since sole proprietors and single member LLCs report their business income on their personal tax returns, they’re NOT required to obtain a tax ID number unless they have employees or a qualified retirement plan.

In this case they would simply use their social security number.

Although, if you have privacy concerns and don’t want to use your social security number on some tax documents or providing it to others like companies who pay you, then getting a tax ID number isn’t a bad idea actually. Just know that technically it’s not necessary.

A tax ID number is also useful if you want to open up a separate business bank account for your side hustle, which by the way, is highly advisable in my opinion.

To obtain one, you can go to the IRS website and search for SS-4.

It’s not difficult to complete the application, but you may have to read pages of instructions that may or may not apply to you. You can file the application online and you get the number right away.

Keep in mind that if you’re successful, the tax ID number will be immediately available. Be sure to locate the document and save it to your computer right away, or better yet print it out..

By the way, I have a full course on how to file taxes for your side hustle that covers this very topic, and all the other questions you might have regarding taxes and your side hustle.

In summary, obtaining an EIN for your side hustle business may not be required in many cases, but it can provide several benefits for tax and accounting purposes, as well as for hiring employees or contractors and opening a business bank account.

Thanks for reading, and see you in the next blog post!