Ever wonder how the IRS keeps track of businesses? It's not by names alone. Just like individuals have a Social Security number, businesses have a unique identifier all their own: the Employer Identification Number, or EIN. Think of it as the Social Security number for your business, a critical piece of information required for everything from opening a bank account to hiring employees and filing taxes.
Understanding what an EIN is, how to get one, and what its implications are for your business is crucial for any business owner, regardless of the size or structure of the company. Failing to obtain an EIN when required can lead to penalties, and misunderstanding its use can cause confusion and errors in crucial business operations. Whether you are a sole proprietor hiring your first employee or a large corporation navigating complex tax regulations, your EIN is a cornerstone of your business's identity in the eyes of the IRS.
What are the most frequently asked questions about EINs?
What does an FEIN identify?
An Employer Identification Number (FEIN) identifies a business entity to the Internal Revenue Service (IRS). It's essentially a Social Security number for businesses, used to track their tax activities and compliance.
The IRS uses the FEIN to identify businesses that must file various tax returns, such as employment taxes, excise taxes, and corporate income taxes. Having an FEIN also enables a business to legally hire employees, open bank accounts, and apply for business licenses and permits. It helps the IRS administer tax laws and ensure businesses are properly paying their taxes.
Not all businesses require an FEIN. Sole proprietorships and single-member LLCs without employees may use the owner's Social Security number instead. However, once a business incorporates, hires employees, or operates as a partnership or multi-member LLC, obtaining an FEIN becomes necessary. It’s crucial to understand whether your specific business structure requires an FEIN to ensure compliance with federal tax regulations.
How do I apply for an FEIN?
You can apply for an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, from the IRS in several ways: online via the IRS website (the most common and quickest method), by mail using Form SS-4, by fax (domestically or internationally, though this is a slower option), or by phone (for international applicants only). Applying online provides immediate issuance of the EIN upon successful submission.
Applying online is generally the easiest and fastest method. The IRS website provides a dedicated EIN application portal that is available Monday through Friday, 7:00 a.m. to 10:00 p.m. Eastern Time. To apply online, you must have a valid Taxpayer Identification Number (Social Security Number, Individual Taxpayer Identification Number, or another EIN) and your principal business must be located in the United States or U.S. Territories. The online application is a single-session process, meaning you cannot save and return to it later, so be sure you have all necessary information ready before you begin. If you choose to apply by mail or fax, you will need to complete Form SS-4, Application for Employer Identification Number. Ensure all information is accurate and legible to avoid processing delays. The IRS website provides instructions on where to mail or fax the form, based on your location and entity type. Processing times for mail and fax applications are significantly longer than online applications, often taking several weeks. Remember to retain a copy of your completed Form SS-4 for your records, regardless of the submission method used.Is an FEIN required for all businesses?
No, an FEIN (Federal Employer Identification Number) is not required for all businesses. Sole proprietorships and single-member LLCs with no employees and operating under the owner's name typically don't need an FEIN. However, most other business structures, such as corporations, partnerships, multi-member LLCs, and any business that hires employees or operates as a non-profit organization, are required to obtain an FEIN.
An FEIN, also known as an Employer Identification Number, is essentially a tax identification number used by the IRS to identify a business entity. Similar to how a Social Security number identifies an individual, an FEIN uniquely identifies a business for tax purposes. It is used for various business activities, including opening a business bank account, applying for business licenses and permits, filing taxes, and paying employees. Even if not legally obligated, some businesses might choose to obtain an FEIN for credibility or to separate their business and personal finances. Furthermore, even sole proprietorships or single-member LLCs might benefit from obtaining an FEIN to protect their Social Security number from exposure on various business forms and documents. Banks, vendors, and other entities may request an identification number for business transactions, and using an FEIN provides a more secure alternative than providing a personal Social Security number. Obtaining an FEIN is free and can be done quickly and easily through the IRS website.What's the difference between an FEIN and an SSN?
The primary difference between an FEIN (Federal Employer Identification Number) and an SSN (Social Security Number) is that an FEIN identifies a business entity, while an SSN identifies an individual. Think of it this way: an SSN is like a personal identification number for citizens and residents to track their earnings and benefits, whereas an FEIN is a business's equivalent for tax purposes.
An SSN is issued by the Social Security Administration and is primarily used to track an individual's earnings history and eligibility for Social Security benefits. It is also used for identification purposes in various contexts, such as employment, banking, and credit applications. An FEIN, on the other hand, is issued by the Internal Revenue Service (IRS) and is used to identify business entities such as corporations, partnerships, LLCs, and certain sole proprietorships. Businesses use their FEINs to file taxes, open bank accounts, apply for business licenses, and conduct other official business activities. Not all businesses require an FEIN. Sole proprietorships without employees typically use the owner's SSN for business tax purposes. However, even sole proprietors may choose to obtain an FEIN for privacy reasons or to establish a more professional image. Businesses that are required to have an FEIN include those with employees, corporations, partnerships, LLCs with more than one member, and certain types of trusts and estates. The FEIN allows the IRS to easily track a business's tax obligations and payments, ensuring compliance with federal tax laws.How do I find my company's FEIN?
Your company's FEIN, or Federal Employer Identification Number, can typically be found on previously filed tax returns, bank statements, official documents from the IRS (such as your EIN confirmation letter, CP575 or 147C letter), loan applications, or business credit reports. If you can't locate it through these means, you can try contacting the IRS directly, though they will need to verify your identity and authority to access the information.
Finding your FEIN is crucial for various business activities, including opening a business bank account, applying for licenses and permits, filing taxes, and hiring employees. It acts as a unique identifier for your business, similar to a Social Security number for individuals. The IRS uses the FEIN to track your business's tax obligations and ensure compliance with federal regulations. If you are still unable to locate your FEIN through internal resources, the IRS provides a service to help you retrieve it. You'll need to call the IRS Business & Specialty Tax Line and be prepared to answer questions to verify your identity as a responsible party for the business. Providing documentation, like articles of incorporation or state business registration, might also be required. Keep in mind that the IRS may have security protocols in place to protect sensitive business information, so patience and persistence are key when contacting them.Can I change my FEIN?
Generally, no, you cannot simply "change" your Federal Employer Identification Number (FEIN). An FEIN is assigned to a specific legal entity and is intended to remain with that entity throughout its existence. However, there are specific circumstances under which a new FEIN may be required or obtained, effectively replacing the old one.
The most common scenarios where a new FEIN might be necessary involve significant changes to the business structure or ownership. For example, if a sole proprietorship incorporates and becomes a corporation, the new corporation will need a new FEIN. Similarly, a partnership that transforms into a limited liability company (LLC) taxed as a corporation will require a new FEIN. Changes in ownership can also trigger the need for a new FEIN, especially if the original entity is dissolved or undergoes a major restructuring.
It's important to understand that simply changing the name of your business or its location does not necessitate a new FEIN. The FEIN is tied to the underlying legal structure and ownership of the business. If you're unsure whether your specific situation warrants a new FEIN, it's always best to consult with the IRS or a qualified tax professional. They can assess your circumstances and provide accurate guidance.
When do I need to use my FEIN?
You generally need to use your Federal Employer Identification Number (FEIN) when dealing with the IRS, opening a business bank account, applying for business licenses or permits, filing taxes as a business, hiring employees, or operating as a corporation or partnership.
Your FEIN acts as a unique identifier for your business, similar to how a Social Security number identifies an individual. The IRS requires it for various tax-related activities, ensuring accurate tracking and reporting of your business's financial transactions. Banks need it to verify your business's legitimacy and to properly report interest earned on business accounts. State and local governments often require an FEIN when you're applying for licenses or permits necessary to operate your business legally. Furthermore, if you have employees, you are legally obligated to have and use your FEIN to report payroll taxes to the IRS. The FEIN is also essential for corporations, partnerships, and LLCs operating as corporations or partnerships for tax purposes, even if they don’t have employees. Basically, any business structure beyond a sole proprietorship (and even some sole proprietorships under specific circumstances) will likely require an FEIN for regulatory compliance and financial operations.Hopefully, that gives you a good handle on what an EIN is and how it's used! Thanks for reading, and we hope you'll come back soon for more helpful business tips and explanations.