Should Family Child Care Providers Give Parents Their Social Security Number or EIN?
As a family child care provider, protecting your personal information is crucial. One common question that comes up is whether to provide parents with your Social Security Number (SSN) or an Employer Identification Number (EIN). In this post, we’ll explain why providing your SSN is not recommended and how getting an EIN can safeguard both your privacy and your business.
Why Not Use Your Social Security Number?
Parents often request your SSN to claim the federal child care tax credit. While they can use either your SSN or a business identification number (EIN), providing your SSN is risky for several reasons, primarily due to identity theft concerns. The more frequently you share your SSN with different families, the higher the chances that it could fall into the wrong hands.
Identity theft is a growing issue, and if your SSN is compromised, it can take a long time to resolve the consequences. By opting to share an EIN instead, you protect your personal information and reduce the risk of identity theft.
What is an EIN and Why Should You Get One?
An Employer Identification Number (EIN) is a unique number assigned by the IRS that functions like a Social Security number for your business. It’s used to identify your business entity, particularly for tax purposes. While you can use either your SSN or EIN for the tax credit, an EIN is a much safer option, as it separates your personal identity from your business.
Here’s why you should get an EIN:
Protect Your Personal Information: Using an EIN ensures that your SSN is not exposed to the public.
Required for Employers: If you hire employees, obtaining an EIN is mandatory. It’s also necessary if you want to open a business bank account.
Free and Easy to Obtain: Getting an EIN is a straightforward process and can be done online in just a few minutes. There’s no cost involved.
How to Get an EIN
Getting your EIN is simple and free. Follow these steps:
Visit the IRS website: Go to www.irs.gov and complete the online application. The process usually takes less than 15 minutes.
Answer the EIN Application Questions: The only potentially confusing question is, "Why is the Sole Proprietor requesting an EIN?" If you’re not hiring employees, you can select “Started a New Business,” even if you’ve been in business for years.
Instant Issuance: Once you complete the online application, your EIN is issued immediately.
No Fee: There is no cost to get your EIN. If you’ve previously obtained an EIN for another business, you can use the same number for your child care business.
Alternatively, if you prefer speaking to someone, you can call the IRS at 800-829-4933 and request your EIN over the phone.
What About End-of-Year Receipts?
In a previous blog post, we discussed providing end-of-year receipts using Form W-10. This form is used by child care providers to give parents documentation of the amounts they paid for child care services during the year. Be sure to provide parents with the necessary tax documents to help them claim their child care tax credits.
Conclusion
As a family child care provider, it’s essential to protect your personal information. Instead of providing your Social Security number to parents, consider applying for an Employer Identification Number (EIN) from the IRS. It’s easy to get, free of charge, and it helps safeguard your personal identity from potential theft.
By providing parents with your EIN instead of your SSN, you keep your personal and business life separate and maintain better control over your sensitive information. This simple step can help you avoid the risks of identity theft while ensuring you meet the tax requirements for your business.
Let us know if you have any questions about obtaining an EIN or how to use it with your business. Stay safe and secure!
