Chances are that until you formed your own business, the only time you ever saw a Federal Employer Identification Number (FEIN or EIN) was when you received a W2 tax form from your employer. Now, suddenly, you are faced with obtaining an FEIN of your own.
FEINs are issued by the Internal Revenue Service (IRS). Many entrepreneurs are slightly daunted at the prospect of filing much of anything with the IRS (who really feels comfortable filing their taxes?). But applying for an FEIN is really very straightforward.
Understanding exactly what an FEIN is, why you need one, and how to acquire one should help relieve any anxieties you may have.
What Is an FEIN?
In order to file federal taxes, an individual needs a Social Security Number. The IRS uses this number to identify you as a federal taxpayer.
A Federal Employer Identification Number works in the same way for business entities such as LLCs and corporations. An FEIN is unique to a single company, and it remains with that company throughout its existence.
An FEIN is also known as an: EIN, Federal Tax ID, and Federal Tax Identification Number.
Determining If You Need an FEIN
Not every business needs an FEIN. The IRS lays out a simple formula for determining whether or not you need one.
If you can answer YES to any of the following questions, you need an FEIN:
- Do you have employees?
- Do you operate your business as a corporation or a partnership?
- Do you file one of these returns: 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:
- Trusts (except certain exempt organizations)
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmer cooperatives
- Plan administrators (organization that processes insurance claims or aspects of employee benefit plans for separate entities)
It is important to note that all corporations must have an FEIN. This is the case even for corporations that are formed purely as holding companies without the intent of conducting business. Every American corporation must file taxes with the IRS, and thus must have an FEIN.
How to Apply For an FEIN
There are numerous ways to apply for an FEIN. The easiest method (and the one preferred by the IRS) is online. Online applications are processed immediately, so you will have your FEIN once the filing is complete
You can apply by fax or mail by filling out a Form SS-4 and submitting it to the IRS. There are different fax numbers and mailing addresses to submit to depending on your residence, so you should check out where to file a Form SS-4.
International applicants can call the IRS directly at 267-941-1099, but you cannot apply over the phone. Instead, if you call you will be asked to fax the Form SS-4. Once the form has been processed and the standard processing period (five days) has passed, you can call the IRS and be given the FEIN over the phone.
The IRS issues Federal Employer Identification Numbers for free.
Canceling an FEIN
You cannot cancel an FEIN. Once the number is issued to a business entity, it is never reused for any reason. Even if your business never files a federal tax return, the FEIN is never canceled and recycled.
The IRS can, however, close your business account (if your business never opens, for example).
To close your business account with the IRS, you must send a letter to the Internal Revenue Service and include the following information:
- Legal name of your business entity
- Your FEIN
- Business address
- Reason for closing the account
- FEIN Assignment Notice (if you have it)
If your business has made any federal tax payments, is liable for any business taxes, or if your company has been notified by the IRS that a tax return is due, then you must make all appropriate tax filings before closing your account.
FEIN For Non-US Residents
Foreign entrepreneurs seeking to form a US company can obtain an FEIN for their business in one of two ways. You can hire a third-party (such as a corporate lawyer or registered agent service) to apply for an FEIN on your behalf, or you can obtain one on your own.
Foreign applicants must fax or mail the Form SS-4 to the IRS. Some applicants will first need to apply for an Individual Taxpayer Identification Number (ITIN). An ITIN is similar to a Social Security Number, but it is assigned to foreign nationals and other non-residents who do not qualify for an SSN.
Not all foreign applicants must have an ITIN. If you can answer YES to any of the following questions, you will need an ITIN:
- Will you hire US employees?
- Do you intend to travel to the US and conduct business yourself?
- Do you need to open a US bank account?
To apply for an ITIN, you must submit a Form W-7 Application for IRS Individual Taxpayer Identification Number. This should be mailed to the IRS, and you should include a federal tax return, proof of identity, and foreign status documents.
Most businesses will need an FEIN. Given that the application is free and the process fairly straightforward, you shouldn’t feel too intimidated by filing with the IRS. On the other hand, if you prefer there are plenty of services that can acquire one for you.
Once you have your FEIN, you will be set for filing federal taxes with the IRS.