What is a Federal ID number?

A Federal Identification Number, aka a Federal Tax Identification Number or Employer Identification Number (EIN), is a unique nine-digit number. The Internal Revenue Service (IRS) assigns them to businesses and organizations for tax filing and reporting purposes. 

It’s used to identify business entities, similar to how a Social Security number identifies an individual, and track their financial activity with the government.

Why do businesses need a Federal ID number?

Businesses typically need a Federal ID Number for the following reasons:

  • Tax purposes: It’s required for filing federal taxes, including income tax returns, employment tax returns, and certain excise taxes.
  • Hiring employees: Businesses need an EIN to hire employees and report employment taxes to the IRS.
  • Opening bank accounts: Banks typically require an EIN to open a business bank account.
  • Establishing business credit: An EIN is often necessary to apply for business loans, lines of credit, or other forms of financing.
  • Legal requirements: Some states and local jurisdictions require businesses to have an EIN for licensing or regulatory purposes.

Having a Federal ID Number also helps businesses maintain their identity separate from personal finances, which can be useful when applying for loans or managing liability. Additionally, some states require businesses to have a Federal ID Number for state tax purposes.

How to apply for a Federal ID number

Businesses can apply online through the IRS website or by mail to obtain a Federal ID Number. The free process takes minutes online, requiring basic information like the business’s legal name, address, and entity type. The IRS promptly issues the Federal ID Number upon application completion.

To apply for a Federal ID number, follow these steps:

  1. Determine eligibility: Your business must have a valid Taxpayer Identification Number (such as a Social Security number) to apply for an EIN.
  2. Complete the EIN application: You can apply for an EIN online, by mail, fax, or phone. The preferred method is to apply online using the IRS’s EIN Assistant on their website.
  3. Provide required information: You’ll need to provide basic information about your business, including its legal name, trade name (if different), business address, and type of business entity (such as sole proprietorship, partnership, corporation, etc.).
  4. Specify the reason for applying: You’ll need to indicate the reason for applying for an EIN, such as starting a new business, hiring employees, opening a bank account, or applying for business credit.
  5. Submit the application: Once you’ve completed the application, submit it electronically through the IRS’s EIN Assistant if you’re applying online. If you are applying by mail, fax, or phone, follow the instructions provided by the IRS.
  6. Receive your EIN: After processing your application, the IRS will assign you an EIN immediately if you apply online. If you apply by mail, fax, or phone, it may take a few weeks to receive your EIN via mail.
  7. Keep your EIN documentation: Once you receive your EIN, keep a record of it in a safe place as you’ll need it for various tax and business purposes.

How to find your Federal Tax ID number

If a business already has a Federal ID Number but cannot locate it, there are several ways to find it:

  • Check tax documents: Look for previous tax returns, W-2 forms, or other tax-related documents filed for your business. The EIN should be listed on these documents.
  • Contact your bank: If you opened a business bank account, the bank may have the EIN on file associated with your account.
  • Check government correspondence: The IRS may have sent you correspondence in the past that includes your business’s EIN. Look through any letters or notices you’ve received from the IRS.
  • Look for business registration documents: If you registered your business with a state or local government agency, the EIN may be listed on registration forms or certificates.
  • Call the IRS Business & Specialty Tax Line: If you can’t locate the EIN through other means, call the IRS at 1-800-829-4933.  

It is essential to keep this number secure and only provide it to authorized individuals or entities. Sharing a Federal ID Number can put a business at risk for identity theft.

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