FEIN Explained: What is a Federal Employer ID Number?
A Federal Employer Identification Number (FEIN) is a unique nine-digit identifier assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. Here's a comprehensive explanation:
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A FEIN functions essentially as a Social Security Number for businesses, serving as the primary identifier for tax and financial purposes. When starting a business, one of the first crucial steps is obtaining a FEIN from the Internal Revenue Service (IRS). This identifier becomes your company’s permanent federal tax ID, essential for everything from filing taxes to opening bank accounts. Most people also know it as an EIN (Employer Identification Number) or simply a Federal Tax ID Number.
Why Your Business Needs a FEIN?
The necessity of a FEIN goes beyond mere tax filing. Modern business operations require this identifier for numerous essential activities. You’ll need it when hiring employees, applying for business licenses, and establishing relationships with vendors. Banks require it to open business accounts, and it’s crucial for issuing W-2s and 1099s to employees and contractors. A FEIN is required for businesses that:
- Have employees
- Operate as corporations or partnerships
- File employment or excise tax returns
- Withhold taxes on non-wage income paid to non-resident aliens
- Have Keogh retirement plans
How to Obtain a FEIN?
The process of obtaining a FEIN has been streamlined for modern businesses. The IRS offers a free online application system that typically provides your number immediately upon approval.
Businesses can apply for a FEIN through several methods:
- Online through the IRS website (preferred method)
- By fax
- By mail using Form SS-4
- By phone for international applicants
Protecting Your Identity
Once assigned, your FEIN becomes a permanent part of your business identity. It’s crucial to protect this number just as carefully as you would a Social Security Number. While you’ll need to share it with banks, vendors, and for tax purposes, be cautious about where and with whom you share this important identifier.Remember, your FEIN stays with your business throughout its lifetime, only changing if your business structure changes or the company closes its doors. It’s an essential piece of your business’s foundation and a key to operating legally in the American marketplace.
FAQs
Can a sole proprietor use their Social Security Number (SSN) instead of a FEIN?
Yes, sole proprietors without employees often use their SSN for tax purposes. However, if the business hires employees or files certain tax forms, they are required to obtain a FEIN.
Is a FEIN the same as a Tax ID Number (TIN)?
A FEIN is a type of Tax Identification Number (TIN) specifically used for businesses. TIN is a broader term that includes Social Security Numbers (SSN) and other tax IDs.
What happens if I lose my FEIN?
If you lose your FEIN, you can retrieve it by contacting the IRS Business and Specialty Tax Line or by looking for it on previously filed tax documents where the FEIN is listed.
Can I use the same FEIN if I change my business structure?
In most cases, if you change the structure of your business (e.g., from a sole proprietorship to an LLC), you will need to apply for a new FEIN. It is best to consult with a tax professional to understand the requirements for your specific situation.
