Obtaining a Federal Tax Identification (ID) number is an important first step when starting your business.
According to the IRS, the federal tax number is used to identify a business. There are many reasons a business might need one, including paying employees, claiming benefits, and filing and paying taxes.
Here’s how to find out if you need a federal tax identification number, how to apply for one, and when your business should use one.
Federal Tax Identification Number vs. EIN
In short, a Federal Tax ID number is the same as an EIN. As is often the case in business, however, you’ll hear several acronyms that reflect the same concept. These acronyms can be confusing, but here’s a clear breakdown of what each refers to and how they differ.
- A Federal Tax Identification Number is also known as a TIN.
- Another acronym for Federal Tax Identification Number is EIN, which stands for Employer Identification Number. An EIN must come from the IRS to be a federal tax identification number and is used to identify a business entity.
- An EIN may also be called a FEIN (Federal Employer Identification Number).
Does my business need a federal tax number?
A business needs a federal tax identification number to apply for a business bank account or loan. Here are a few other questions to help you figure out if your business might need a federal tax number:
- Do you have employees?
- Do you withhold taxes on income other than wages paid to a nonresident alien?
- Is your business a partnership or corporation?
- Is your business related to mortgage investments?
- Is your business related to real estate channels?
- Is your business affiliated with non-profit organizations?
- Does your business work with estates, trusts or IRAs?
- Do you file a tobacco, employment, alcohol, firearms or excise tax return?
If the answer to any of these questions is yes, your business probably needs a tax ID. For more information, visit IRS.gov
If your business is tax exempt, you still need to apply for an EIN. However, you must ensure that your business qualifies for tax exemption before applying for an EIN.
When applying for an EIN, tax-exempt businesses have three years to prove their status. You don’t want to spend any of that time trying to jump through legal hoops and requirements to comply with tax exemption regulations.
How to Apply for a Federal Tax Identification Number
Once you determine that your business needs a tax identification number, you will work with the IRS to obtain one. You can apply online; other options include phone, mail or fax.
A federal tax number is free, so avoid any scams that try to get you to pay for an EIN. The IRS administers and provides tax identification numbers to businesses in the United States, so you can apply directly at IRS.gov.
Here are the three key steps:
1. Make sure your business is eligible
To qualify for an EIN, your business must operate in the United States. As a business owner applying for an EIN, you must have a valid taxpayer identification number, such as a social security number or individual taxpayer identification number. Check the list of questions above to see if your business qualifies for a federal tax identification number. You can also find helpful information in the online IRS FAQ.
2. Apply for only one EIN per day
You are limited to submitting one EIN per day. If you are the only individual applying, you will be considered the responsible party for the business. The responsible party is the person who controls or owns the business entity and maintains the greatest control over business decisions.
3. Get your federal tax identification number
After you submit your online application with all the required information, you should receive your Federal Tax Identification Number. You can view, download, save, and print the confirmation notice—which includes your number—directly from the IRS website. You can start using your EIN as soon as you receive this notice.
Once you receive your EIN, meet with a local business banker to learn how a business bank account can help you get started and what financing options may be available to you.
For Informational/Educational Purposes Only: The views expressed in this article may differ from those of other employees and departments of JPMorgan Chase & Co. The views and strategies described may not be suitable for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and goals before making any decisions and consult with an appropriate professional(s). Forecasts and past results are not guarantees of future results. JP Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
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