A Federal Identification Number, also called a Federal Tax Identification Number or Employer Identification Number (EIN), is a unique nine-digit number assigned by the IRS to identify businesses for tax and reporting purposes.
It works like a Social Security number but for your business. The IRS uses it to track your company’s tax filings and financial activity.
Why Do Businesses Need a Federal ID Number?
Most businesses need a Federal ID Number for key operational and compliance reasons:
Tax purposes: Required for filing income, employment, and excise tax returns.
Hiring employees: Needed to report payroll and employment taxes to the IRS.
Banking: Banks require an EIN to open a business bank account.
Credit: Helps build business credit and apply for financing.
Licensing: Some states and cities require it for registration or permits.
Having an EIN also separates business finances from personal ones, important for liability protection and credibility with lenders or vendors.
How to Apply for a Federal ID Number
You can apply directly through the IRS online, by mail, fax, or phone. It’s free and usually takes just a few minutes online.
Here’s how:
Check eligibility: You’ll need a valid Taxpayer Identification Number (like an SSN).
Apply online: Use the IRS EIN Assistant on the IRS website; it’s the fastest method.
Provide business details: Legal name, trade name, address, and entity type (e.g., sole proprietor, partnership, corporation).
State your reason: Starting a new business, hiring employees, opening a bank account, etc.
Submit your application: Get your EIN immediately online or within a few weeks if applying by mail or fax.
Store it safely: Keep your EIN documentation secure for tax and banking use.
How to Find Your Federal Tax ID Number
If you already have an EIN but can’t find it, here are your options:
Check tax forms: It’s listed on past tax returns, W-2s, or IRS filings.
Contact your bank: Your business bank account should have the EIN on file.
Review IRS letters: Look for any IRS correspondence sent after registration.
Check registration papers: State or local business filings may list it.
Call the IRS: If all else fails, contact the IRS Business & Specialty Tax Line at 1-800-829-4933.
Always keep your EIN confidential. Treat it like you would your personal SSN; it’s key to your business identity and can be misused if shared carelessly.
FAQs about Federal Tax ID Number
Is a Federal ID Number the same as an EIN?
Yes. The terms are used interchangeably. Both refer to the nine-digit number assigned by the IRS to identify a business for tax purposes.
Do sole proprietors need an EIN?
Not always. Sole proprietors without employees can often use their Social Security Number for tax purposes, but an EIN can help separate personal and business finances.
Can I use my EIN immediately after applying?
Yes, if you apply online and receive it instantly. You can start using it right away for banking, tax filing, and hiring employees.
Does an EIN expire?
No. Once issued, your EIN stays with your business for its entire life, even if you change locations or business names.
Can a business have more than one EIN?
Usually not. Each business entity should have only one EIN. If you start a new legal entity, though, you’ll need to apply for a new one.
