- A federal tax recognition number ( FEIN ) is required for businesses to secure a business license, file a tax restitution, and access a wide range of necessity services .
- Sole proprietors and independent contractors who have no employees don’t need a FEIN.
- Under certain circumstances, a business might need to change its FEIN.
- This article is for entrepreneurs and small business owners who need information about acquiring a federal tax identification number.
Before you can open a bank report, apply for a commercial enterprise license, or file a tax reappearance, you will be required to obtain a federal employer identification number ( FEIN ) for your business. Read on to learn what a FEIN is and how to get one .
What is a federal tax identification number (FEIN)?
A federal tax identification act, besides known as a FEIN or an employer identification numeral ( EIN ), is issued to entities that do business in the United States. The FEIN is a unique nine-digit bodied ID numeral that works the same means a Social Security number does for individuals. The tax number for individuals, besides referred to as a tax identification numeral or TIN, is an individual ’ s Social Security number. It ’ mho easy to get the two types of numbers mixed up. Just remember that one is for commercial enterprise entities, and one is for individuals. A FEIN is a manner for the IRS and early government entities to identify and track clientele entities ’ tax and fiscal activities. It ’ second required to file tax returns, adenine well as to set up retirement accounts and health accounts to offer medical and alveolar consonant benefits to employees, among early uses.
Who needs a FEIN?
not every humble occupation entity needs a FEIN, but many do :
- Any business with employees
- Any business that operates as a corporation or a partnership
- Any business that pays employment, alcohol, tobacco or firearms tax returns
Businesses that typically do not need a FEIN include the pursue :
- Those that operate a sole proprietor
- Those that do not have employees
- Those that are not required to pay certain taxes as indicated above
If you start your clientele as a sole owner and use your Social Security number as opposed to a FEIN, you may discover later that you need one – chiefly, if you plan to expand or restructure your business to a corporation and/or rent employees. In fact, if you form a corporation by and by, you will need a FEIN. A FEIN is a very important function of your business data when you ’ ra filing local, state and federal taxes .
In what other instances is a FEIN needed?
You besides need a FEIN when your organization pays taxes of any kind and when you issue employee-related tax forms, such as W-2s. Employers are required to issue W-2s to their employees at the end of each tax class. All payroll reports contain your FEIN – including monthly, quarterly, and annual tax forms, all of which can be filed by a professional payroll march company. You will besides have to issue a 1099 to every independent contractor you paid at least $ 600 to during the tax year, and your FEIN will besides be needed on that form. not only will your business need a FEIN for respective purposes, but your employees and external contractors will besides need it when they prepare their tax returns .
How can I get a FEIN?
1. Determine your eligibility for a FEIN.
The two indicators that you ’ re eligible for a FEIN are if your main business is located within the U.S. or its territories, and if you have a valid Social Security number or another form of tax designation, such as another FEIN. Having your main business in the U.S. or its territories means that the majority of your income as a commercial enterprise owner comes from a practice residing in this sphere. Therefore, even if you have another business outside the U.S., you may still be eligible for a FEIN. The person applying for a FEIN does not need to be the business owner, but they must have firsthand cognition of and dealings with the caller ’ randomness finances. A secretary or administrative adjunct can besides apply for a FEIN ; they can just sign Form SS-4 and provide their information in the third-party designee section .
2. Collect the necessary information for the IRS.
The IRS requires the information in Form SS-4 : application for Employer Identification Number. First, you ’ ll need to provide a physical address for your business ( with a location in the U.S. ) to receive a FEIN. On the application form, you ’ ll need to submit the legal structure of your business, such as LLC or pot. If your clientele is an LLC, you must list the members of the organization. You need to further express the type of business you conduct.
This is some extra information you ’ ll need when apply :
- The reason you’re applying for a FEIN. As an example, you may be launching a new business or have restructured your existing business.
- The specific date you began or acquired your business.
- The industry your business is in or that you retain business in, such as retail or consulting, as well as the product or service description.
- When employee wages were first paid through your business.
- The date of the end of your fiscal or accounting year. This is typically the month of December if you pay your taxes through the calendar year.
- The highest estimate of employees you plan to hire in the coming year.
3. Apply for a FEIN online, by phone or through the mail.
If you are required to have a FEIN, there are several ways you can apply for one :
- By phone: (800) 829-4933
- By fax or mail: You can find Form SS-4 here and locate the fax number and mailing addresses for your location on the IRS website.
- On the IRS website: You can file Form SS-4 online or participate in an interview-style live chat that will ask you questions and issue you a FEIN if you require one. This service is available Monday through Friday, 7 a.m. to 10 p.m. EST.
careless of the method you choose, it will take two weeks for your number to be active in the IRS system. even if your clientele is not required to have a FEIN, you may decide that it ’ mho worth applying for one anyhow. There is no appoint to do so, and you never know when you may decide that it ’ s time to hire an employee or when your occupation circumstances might change .
When do I need to change my FEIN?
once you ’ ve received your FEIN, you do not have to change your FEIN unless under particular circumstances as deemed by the IRS. If your occupation is a pot, you ’ ll be required to change your FEIN if :
- Your business changes to a sole proprietorship or a partnership.
- A new corporation is created through a merger.
- Your business becomes subsidiary to another corporation.
If your business is a partnership, you ’ ll be required to change your FEIN if :
- The business changes to a sole proprietorship.
- Your business becomes a corporation.
- A new partnership is formed over an old one.
If you have a FEIN as a sole owner or an LLC, you ’ ll be required to change your FEIN if :
- You’re in bankruptcy proceedings.
- You change your business to a corporation or a partnership.
- You gain ownership of another business.
You don ’ t need to change your FEIN if the diagnose or location of your business changes .
What is the difference between a FEIN and tax ID number?
A FEIN is normally given entirely to those who apply for the union employer identification issue. The FEIN will help easily identify your business on payroll and other taxation forms. A FEIN can work as a tax identification numeral, and many states will not assign a offprint number. A FEIN can be assigned to most clientele types, with a few exceptions. As an case, you can use your Social Security number as your tax identification total if you ’ re a sole owner. If you finally incorporate your business, your tax ID number will need to change and become a FEIN.
Is a FEIN public?
Although many entities use their FEINs to report their taxes and other fiscal information to the IRS and other politics entities, it is public information. Corporations must contribution their FEINs with the other businesses they do business with. It is frequently needed for completing W-9 forms, providing credit references and sharing other forms of data. Sharing your FEIN sometimes creates undesirable vulnerability, which leads to some flat of vulnerability. Just like Social Security numbers, FEINs should be used and shared discreetly to reduce the risk of identity larceny and fraud .
What if I’m not sure I need a FEIN?
If you ’ re not certain you need a FEIN, you can consult the Internal Revenue Service ’ s web site. According to Melvin Springer, a New York-based fiscal executive, a dear rule of finger is that “ if you record them on your personal tax revert, you are not required to have one, as you can use your Social Security number. If you intend to report them on a business tax fall, you will be required to have a FEIN. ” If this is confusing to you, you can hire a on-line payroll serve to help with process and reporting payroll-related taxes .