If you’re starting a small business or making changes to an existing one, you’ve likely heard about the Federal Employer Identification Number (FEIN). But what is it, and how do you apply for one? This guide breaks down everything small business owners need to know about FEINs and how to get one quickly and easily.
What Is an FEIN?
A Federal Employer Identification Number (FEIN), also called an Employer Identification Number (EIN), is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify your business for tax purposes. It’s essentially a Social Security Number for your business.
You’ll need an FEIN to:
- File federal and state taxes.
- Open a business bank account.
- Hire employees.
- Apply for business licenses and permits.
- Handle payroll and issue W-2s or 1099s.
Even if you’re a sole proprietor without employees, having an FEIN can be beneficial for separating your personal and business finances.
Who Needs an FEIN?
Not all businesses are required to have an FEIN, but you’ll need one if:
- Your business has employees.
- You operate as a corporation or partnership.
- You file certain tax returns, such as employment or excise taxes.
- You withhold taxes on income (other than wages) paid to nonresident aliens.
- You’re involved with a trust, estate, or non-profit organization.
Tip: Even if you don’t meet these criteria, obtaining an FEIN can simplify business operations and protect your Social Security Number from being used on tax forms.
Step-by-Step Guide to Apply for an FEIN
The application process for an FEIN is straightforward and free. Here’s how to do it:
1. Gather Required Information
Before you begin, have the following details ready:
- Business name and any trade name (DBA).
- Responsible party’s name and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
- Business address.
- Business entity type (e.g., sole proprietorship, LLC, corporation).
- Reason for applying (e.g., starting a new business, hiring employees).
2. Choose Your Application Method
You can apply for an FEIN through one of these methods:
- Online: The fastest and easiest way to apply is through the IRS website. You’ll receive your FEIN immediately upon completing the application. The online system is available Monday through Friday, 7 a.m. to 10 p.m. Eastern Time.
- By Mail: Fill out Form SS-4 (Application for Employer Identification Number) and mail it to the IRS. Processing time can take up to four weeks.
- By Fax: Complete Form SS-4 and fax it to the appropriate IRS fax number. You’ll receive your FEIN in about four business days if your application is complete.
- By Phone (for international applicants): If your business is located outside the U.S., you can call the IRS at 267-941-1099 to apply.
3. Complete the Application
Regardless of the method, you’ll need to provide accurate information about your business structure and operations. Be sure to double-check for errors to avoid delays.
4. Receive Your FEIN
- If you apply online, you’ll receive your FEIN immediately.
- For mail or fax applications, you’ll get your FEIN via mail.
After You Get Your FEIN
Once you have your FEIN, here’s what to do next:
- Open a Business Bank Account:
Use your FEIN to open a dedicated business account, which helps keep your personal and business finances separate. - Update Tax Forms:
Provide your FEIN on tax forms, such as W-2s for employees or 1099s for contractors. - Apply for Licenses and Permits:
Some business licenses and permits require your FEIN, so include it in the application process. - Keep It Safe:
Store your FEIN securely, as you’ll need it for tax filings, payroll, and other important business activities.
Common Questions About FEINs
1. Is there a fee to apply for an FEIN?
No, applying for an FEIN is completely free through the IRS. Beware of third-party services that charge a fee to file on your behalf.
2. Can I use my SSN instead of an FEIN?
If you’re a sole proprietor without employees, you may be able to use your SSN for tax purposes. However, getting an FEIN is highly recommended to protect your personal information.
3. Can I change my FEIN later?
You can’t change an FEIN once it’s issued. If your business structure changes significantly (e.g., from sole proprietorship to corporation), you’ll need to apply for a new FEIN.
Why an FEIN Is Important for Small Businesses
Having an FEIN simplifies many aspects of running a business, from filing taxes to building credibility with financial institutions. It also provides a layer of protection for your personal identity and ensures compliance with IRS regulations.
Whether you’re just starting or looking to formalize your operations, applying for an FEIN is an essential step for small business success.
Need more help with small business finances?
From navigating tax forms to managing payroll, we’ve got you covered. Reach out to a trusted tax professional or explore our other guides for more insights!
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