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 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:
- 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.