A federal tax ID number is basically a Social Security Number for a business.
A federal tax ID number is a unique, nine-digit number that is issued by the IRS to identify a business for tax reporting purposes. It is also commonly referred to as an employer identification number (EIN) or a federal employer identification number (FEIN).
When do I need a federal tax ID number/EIN?
Before you operate a new business you may need to obtain an EIN. An EIN is required if your business meets any of the following criteria:
- You have employees
- Your business operates as a corporation or a partnership
- You file tax returns for employment, excise, or alcohol, tobacco, and firearms
- You withhold taxes on income, other than wages, paid to a non-resident alien
- You use a Keogh Plan (a tax-deferred pension plan)
- Your business works with certain types of organizations such as trusts, estates, or nonprofits
Along with tax reporting, banks and financial institutions require their clients to have an EIN to open a business bank account. Other companies that you do business with may also require that your business provide an EIN to pay any of your invoices.
Is an LLC or sole proprietorship required to have a federal tax ID/EIN?
An LLC with two or more owners (called members) is required to obtain an EIN. The IRS defines a multi-member LLC as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation.
Single-member LLCs (an LLC with one owner) and sole proprietorships are not required to obtain an EIN unless they meet one of the criteria listed in the previous section. (For example, a business with at least one employee is required to have an EIN).
Even if your business is not required to have an EIN, there are benefits to having an EIN, including helping to keep your personal and business finances separate or to discourage personal identity theft. If you are a single member LLC or sole proprietor, you can operate your business using your Social Security Number. But remember, for tax purposes your number will be shared with clients, partners, vendors, tax agencies, and others creating potential privacy and identity theft concerns. Using an EIN can reduce this risk.
How do I get a federal tax ID/EIN?
There are several ways to obtain an EIN.
If you are a domestic business, you will need a taxpayer identification number (TIN) before applying for an EIN. A TIN could be a Social Security Number or individual taxpayer identification number (ITIN).
Your application must include the name and TIN of the principal officer, general partners, owner, grantor, or trustor. The IRS refers to this individual as the “responsible party.” A responsible party controls, manages, or directs the business entity and the disposition of its funds and assets.
EIN applications can be made online or by mail or fax.
- Online: Once you complete your request and the information provided is validated, an EIN is issued immediately.
- Mail: Complete Form SS-4 and mail it to the address on the IRS website. Processing time for an EIN via mail is approximately four weeks.
- Fax: You can also fax Form SS-4 as a PDF to the listed fax number. Refer to Where to File Your Taxes (for Form SS-4). You can elect to receive your EIN notification via fax. The process takes about four business days.
If you are an international application, you must apply for an EIN by phone. The individual who makes the call must be authorized to receive the EIN and address any questions about the information provided on Form SS-4.
You can also obtain an EIN by using a service provider.
Federal tax ID/EIN FAQs
Is an EIN and a state tax ID the same thing?
A state tax ID and a federal EIN are two different types of numbers that can be used to identify a business.
A federal EIN is used to identify your business for tax purposes. The EIN is issued by the IRS and can be used in the states in which you operate.
A state tax ID, also known as a state tax registration or state EIN, is assigned by a state entity, and is used to identify a business for tax purposes. However, a state tax ID is state-specific. If you expand into other states, you may need to obtain a state tax ID number in each state where you operate.
Is an EIN the same as a TIN?
TIN, which stands for taxpayer identification number, is an identification number used by the IRS in the administration of tax laws.
An EIN (also referred to as a federal tax ID) is a type of TIN. Other types of TIN include the Social Security Number, individual taxpayer identification number (ITIN), taxpayer identification number for pending U.S. adoptions (ATIN), and preparer taxpayer identification number (PTIN).
How do I obtain an individual tax identification number (ITIN)?
If you do not have a Social Security Number, you must have an ITIN to apply for an EIN. To obtain an ITIN from the IRS, complete and mail IRS Form W-7. You can get started by printing Form W-7 and the associated instruction sheet.
Can I reuse the federal tax ID number (EIN) from my sole proprietorship?
If you change your business structure or ownership, generally you will need a new EIN. For example, if you are a sole proprietor and decide to form an LLC or corporation, you must obtain a new EIN for your LLC or corporation.
Can I use the same EIN for multiple businesses?
You may be able to use one EIN for multiple business locations, but you should have only one EIN for the same business entity.
For example, if you operate a landscaping business and wish to expand to other locations, you are not required to get a new EIN. But if you want to form another LLC (say for a different type of services company, like a pool installation company), you will need to obtain another EIN for that business.