If you’re issuing a 1099, you need an Employer Identification Number on the form; there’s no way around it. If you’re the contractor receiving the 1099, whether you need an EIN depends on how your business is set up: corporations, partnerships, and multi-member LLCs must use one, while sole proprietors and single-member LLCs can use either an EIN or their Social Security number. Many sole proprietors get an EIN anyway so they aren’t handing their SSN to every client.
Who Needs an EIN and Who Can Use an SSN
The Taxpayer Identification Number the IRS wants on a W-9 or 1099 can be an SSN, an ITIN, or an EIN, depending on the entity.1Internal Revenue Service. Form W-9, Request for Taxpayer Identification Number and Certification Which one applies to you comes down to two things: whether you’re the payer or the recipient, and how your business is legally organized.
Sole proprietors and single-member LLCs can put either an SSN or an EIN on their W-9. Both are accepted. Freelancers routinely start out using an SSN and never bother applying for an EIN, and that’s legal as long as they don’t have employees or file excise tax returns.
Corporations, partnerships, and multi-member LLCs must use an EIN. These entities are legally separate from their owners and carry their own federal tax identification.2Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
If you’re the payer — the business writing checks and filing the 1099-NEC — you need an EIN on every form you issue. Your SSN won’t do, even if you personally operate as a sole proprietor. The payer’s EIN is how the IRS identifies you on every information return you send in.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Why Sole Proprietors Often Get One Anyway
Every client who pays you $600 or more needs a taxpayer ID from you to file a 1099-NEC.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Without an EIN, that ID is your Social Security number, and it ends up in the hands of every client, every bookkeeper they use, and whatever payroll or accounts-payable software sits between you. That’s real exposure for a nine-digit number that unlocks your entire financial identity.
An EIN lets you keep the SSN off W-9s, invoices, and business credit applications. It won’t erase identity theft risk, but it takes your most sensitive identifier out of routine paperwork.
An EIN also smooths out business banking. Some banks require one to open a business checking account, and having it from the start beats scrambling later. It makes separating personal and business finances easier, which pays off at tax time.
How to Get an EIN
Applying is free. The form is SS-4, but most applicants never touch the paper version because the IRS steers people to the online tool, which takes about 15 minutes.4Internal Revenue Service. Instructions for Form SS-4
Applying Online
The online application is the fastest route. You’ll answer questions about your entity type, legal name, address, and reason for applying. Whoever is applying must have a valid SSN, ITIN, or EIN to serve as the “responsible party.” When you finish, the system issues the EIN on the spot, and you can use it that same day.4Internal Revenue Service. Instructions for Form SS-4
One quirk: the online system isn’t available all the time. It runs Monday through Friday from 6 a.m. to 1 a.m. Eastern, Saturday from 6 a.m. to 9 p.m., and Sunday from 6 p.m. to midnight.5Internal Revenue Service. Get an Employer Identification Number Plan around those hours if you need the number urgently.
Applying by Fax or Mail
If you can’t use the online tool — for instance, applicants located outside the U.S. and its territories — you can fax a completed Form SS-4 and the IRS will typically fax the EIN back within four business days. Mailing the paper form is the slowest option; expect four to five weeks before the EIN arrives.4Internal Revenue Service. Instructions for Form SS-4
Putting Your EIN on the W-9 and 1099-NEC
Once you have the EIN, the paperwork is straightforward. A client sends you Form W-9 to request your TIN. You enter your legal name, business name (if different), address, tax classification, and your EIN in Part I, then sign and date the certification. Your signature confirms the TIN is correct and states whether you’re subject to backup withholding.1Internal Revenue Service. Form W-9, Request for Taxpayer Identification Number and Certification
Single-member LLCs need to be careful with Lines 1 and 2. The owner’s name goes on Line 1 and the LLC’s name goes on Line 2, not the reverse. Flipping them is one of the most common W-9 errors and can produce a TIN mismatch notice from the IRS.6Internal Revenue Service. Instructions for the Requester of Form W-9
Your client keeps the W-9 on file and uses it to prepare your 1099-NEC after year-end. Your EIN goes in the recipient’s TIN box on the 1099-NEC; the client’s own EIN goes in the payer’s TIN box.
What Happens If the TIN Is Missing or Wrong
If a contractor doesn’t provide a TIN, provides the wrong one, or won’t certify their W-9, the payer can’t just leave the field blank. Federal law requires 24% backup withholding on every reportable payment, sent straight to the IRS.7Internal Revenue Service. Backup Withholding It applies whether or not the contractor eventually files their own return.
Backup withholding is triggered in four situations: the payee doesn’t provide a TIN, the IRS notifies the payer that the TIN is incorrect, there’s been unreported interest or dividend income by the payee, or the payee fails to properly certify the W-9.8Office of the Law Revision Counsel. 26 U.S. Code 3406 – Backup Withholding Any amount withheld gets reported in Box 4 of the 1099-NEC.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
For the contractor, the fix is simple: return the W-9 promptly with the correct TIN. Losing 24% of every check is a steep price for slow paperwork, and you won’t recover the money until you file your own return and claim credit for the withholding.
Foreign Contractors Use Different Forms
The W-9 and 1099-NEC process covers U.S. persons only. If the contractor isn’t a U.S. citizen or resident alien, you don’t request a W-9 and you don’t issue a 1099-NEC. Instead, you request Form W-8BEN for individuals or W-8BEN-E for entities, which certifies foreign status.9Internal Revenue Service. About Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) Payments to nonresident aliens are reported on Form 1042-S and are subject to their own withholding rules under any applicable tax treaty.10Internal Revenue Service. Reporting Payments to Independent Contractors