Federal Tax ID Number: Who, What, When, Where, and Why?
What is a Federal Tax ID Number?
A Federal Tax Identification Number is also known as a Federal Employer Identification Number and is often abbreviated as TIN, FEIN, or just EIN. A Federal Tax ID Number is what the government uses to identify a business or organization. An EIN is to businesses what a social security number is to individuals. It’s a nine-digit number assigned and is assigned by the IRS specifically to identify the tax accounts of employers and can be used in the place of one’s social security number whenever the situation is business-related.
Who Needs an Federal Tax ID Number?
Most businesses need an EIN, but there are some cases where it is not necessary. Ask yourself the following questions:
- Do you have any employees?
- Is your business operating as a corporation, LLC or partnership?
- Do you file tax returns for employment, excise, or alcohol, tobacco and firearms?
- Do you withhold taxes on income, other than wages, paid to a non-resident alien?
- Do you have a Keogh plan?
- Are you involved with any of the following types of organizations:
– Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
– Estates
– Real estate mortgage investment conduits
– Non-profit organizations
– Farmers’ cooperatives
– Plan administrators
If you answered “yes” to any of the questions above, it is required that you have a Federal Employer Identification Number. Even if your type of business doesn’t require one, most business advisors recommend getting an EIN to use in place of your social security number.
Why Would I Want to Use my Federal Tax ID Number?
Businesses would want to use their EIN whenever they are filling out or applying for anything that is business-related. For example, you would want to use your FEIN when you’re opening up a business bank account, applying for business licenses, applying for credit, filing tax reports, filing electronic returns and for filing state taxes. You would want to use an FEIN instead of your own personal social security number because it is more secure and allows you to keep your business transactions separate from your personal actions.
When might I need a new Federal Tax ID Number?
There are specific instances when one would need to get a new Federal Tax ID Number. If any of the following situations apply to you, you need a new FEIN if you:
- Change your business structure (all business entities)
- Are subject to a bankruptcy procedure (sole proprietorships)
- Purchase or inherit an existing business that is operated as a sole proprietorship (sole proprietorships)
- Receive a new charter from the secretary of state (corporations)
- Are a subsidiary corporation using your parent corporation’s EIN or become a subsidiary (corporations)
- Go through a statutory merger that results in the creation of a new corporation (corporations)
- End an old partnership to being a new one (partnerships)
- Form a new LLC with more than one member (LLC’s)
- Form a new LLC with one member and elect to be taxed as a corporation or s corporation (LLC’s)
- Create a trust with funds from an estate (estates)
- Represent an estate that operates a business after the owner’s death (estates)
- Are the grantor/maker of many trusts (trusts)
- Change a trust into an estate (trusts)
- Change a testamentary trust into a living or inter vivos trust (trusts)
- Terminate a living trust by distributing its property to a residential trust (trusts)
Where Can You Get Your Federal Tax ID Number?
Federal Tax ID Numbers are available through the IRS. If you don’t feel like dealing with the IRS bureaucracy yourself, there are plenty of third-party vendors that offer services to get it for you, like SignatureFiling.com. Not only can going through a third party save you time, SignatureFiling.com offers an online application that is at your disposal 24 hours a day, 7 days a week, so you can apply whenever is most convenient for you.
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