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WHAT IS A FEDERAL EMPLOYER IDENTIFICATION NUMBER?

A Federal Employer Identification Number (FEIN) is a nine-digit number that the Internal Revenue Service (IRS) uses to identify businesses. It is can also be referred to as a Taxpayer Identification Number, a Federal Tax Identification Number, a Federal Tax ID, or an EIN.

Contrary to popular belief, there is no difference between a FEIN and EIN. The FEIN acts as a unique identifier for a business when taxes are filed. The IRS allows a business to have taxpayer identification number if they meet the following criteria:

  • If a 130608_tax_forms_ap_328-300x201.jpg business has one or more employees
  • If the business is a corporation or a partnership
  • If they file Employment, Excise, or Alcohol, Tobacco and Firearms tax returns
  • If the business has a Keogh plan
  • If the business is involved with any of the following:
  • Trusts
  • Estates
  • Real Estate mortgage investment conduits
  • Nonprofit Organizations
  • Farmer's cooperatives

• Plan administrators 

There are some businesses in which the IRS does not require a FEIN. Single Member LLCs and sole proprietors that do not meet any of the above criteria do not need use a FEIN. When a business spends more than $400.00 in a calendar year, the business is required to file taxes. In order to do so, the business must either use a FEIN or a personal social security number in order to identify the business.

In a LLC, the profits of the company are distributed to the partners who are then taxed individually. A LLC would not need a FEIN because they can substitute in their social security number when filing taxes for their business. It is safer for a business owner to give out their personal social security number as little as possible. A FEIN acts as a social security number that can be used when filing taxes, opening a business bank account, and to obtain a business credit card.

How to apply for an FEIN

The easiest and fastest way to apply for a FEIN is to apply online at the IRS website. Submitting an application online will give you a FEIN almost immediately after completing the form, but the number will not be active in the IRS system for two weeks. There are also other methods to applying for a FEIN, such as through fax or through mail. When using a method other than applying online, it may take up to four weeks to receive a FEIN.

When applying for a FEIN, you will need to obtain the following information about your company:

  • The legal and trade name of the business or individual that is requesting a FEIN
  • The mailing address, street address and county and state of where the business resides
  • The Social Security number of the responsible party
  • The business entity of the business
  • The number of members if the business is an LLC
  • The state of incorporation if it is a corporation
  • The reason as to why you are applying for a FEIN
  • The date you started the business
  • The highest number of employees you expect within the next 12 months and the date of which wages are paid

• The main activities of your business

There are benefits of having a FEIN such as the ability to obtain building permits and pay state or local taxes without using a personal social security number. Obtaining a FEIN is not necessary for a business, but there are benefits to obtaining a FEIN that can be helpful for the growth of a business.

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