Everyone is keen in looking for ways to handle their taxes better, save some extra pennies on tax and get the maximum possible benefit. When you are looking for filing your taxes for a new corporation, there are few terms you should know about such as Personal-Service Corporation tax ID and how it can benefit you. One of the most essential things is to apply for a federal tax id before you plan to file taxes for your new corporation. Most people don’t have clarity when it comes to tax filing and the procedures for it. Few go for a tax consultation and the rest look for other available options within reach. We share with you the things that you should know about Personal-Service Corporation tax ID and its benefits.
What is Personal-Service Corporation?
A Personal-Service Corporation is a business entity that is created for the purpose of providing personal services to individuals or groups. These personal services can include any activity performed in the following fields: law, health, consulting, engineering, accounting, architecture, actuarial science or performing arts etc.
A personal-service corporation enjoys a number of benefits from the IRS. In order to enjoy the benefits, you need to register for a personal-service corporation tax ID. Let’s see what a personal-service corporation tax ID is and how to use it.
Personal-Service Corporation tax ID:
In order to file taxes, you need a federal tax ID that will identify your entity in the eyes of the government. If your company is a personal-service corporation then you will need a personal service corporation tax ID, which is almost same as an EIN number, used for all tax purposes. But before you apply for one, you should know if your corporation is eligible to register for a Personal-Service Corporation tax ID.
Is your entity a personal-service corporation?
A personal-service corporation is a unique corporation that receives tax benefits if it can meet the following IRS ownership requirements:
- The employee-owners must perform at least 20% of the personal services themselves.
- Its principal activity during the testing period is performing personal services. The testing period for any tax year is generally the prior tax year.
- The employee-owners must also own at least 10% of the outstanding stock of the personal-service corporation on the last day of the initial one-year testing period.
Who is an employee-owner?
A person is called an employee-owner of a personal-service corporation if the following conditions apply:
- They are an employee of the corporation or perform personal services for, or on behalf of, the corporation (even if they are an independent contractor for other purposes) on any day of the testing period.
- They own stock in the corporation at any time during the testing period.
If your entity meets the above conditions then it can be considered a personal-service corporation and is eligible to register for a personal-service corporation tax ID.Now that you are all set to apply for a personal-service corporation tax ID and you might be wondering if there is anything else you need in order to apply for this ID.
To apply for a Personal-Service Corporation tax ID:
Additionally, there are few more things that you might need to register your entity for a Personal-Service Corporation tax ID, such as:
- Your employees must have individual tax ID’s as the taxes will be collected from the company and the employees as well.
- The EIN for the employees is usually same as their social security number.
How long does it take to get a Personal-Service Corporation tax ID?
You might feel is as a tedious process and might back-out from getting into the trouble but actually it’s an easy process. If you want to opt for a quick and hassle-free way then go for the online mode. All you need to do is follow these steps:
- Go to IRS website and apply online for a personal-service Corporation tax ID.
- You can easily complete the entire process yourself and if you’re not sure then delegate the task to a trusted accountant.
- Once done with the online form filling, you can get your tax ID immediately.
There is another alternate way which is not as fast as online option. You can apply via fax or mail but the waiting period is quite long which can go up to several weeks to receive your tax ID.
It is indeed essential to know about your corporation type so as to get the maximum benefits. You have learnt that a personal-service corporation has numerous benefits and how you can get a tax ID. There are different benefits for different corporations and their field of work. One such field is creative/fine arts or photography, in which any current expenses you incur pursuant to creative work are deductible for the corporation but either you or your family members must hold all or nearly all of the corporation’s outstanding stock. This rule does not apply to other types of personal-service corporations.