Getting a federal tax identification (ID) number is an important first step when you start your business.

According to the IRS, Opens Overlay, a federal tax ID number is used to identify a business. There are many reasons why a business may need one, including paying employees, claiming benefits, and filing and paying taxes.

Here’s how to figure out if you need a federal tax ID number, how to apply for one, and when your business should use it.

 

Federal tax ID number versus EIN

In short, a federal tax ID is the same as an EIN. As is often the business case, though, you’ll hear several acronyms that all reflect the same concept. These acronyms can be confusing, but here is a clear breakdown of what each refers to and how they differ.

• The federal tax ID number is also known as the TIN.

• Another acronym for the federal tax ID number is the EIN, which stands for Employer Identification Number. An EIN must come from the IRS to be a federal tax ID number, and it 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 ID number?

A business needs a federal tax ID number to apply for a business bank account or loan. Here are several other questions to help you figure out whether your business might need a federal tax ID number:

• Do you have employees?

• Do you withhold taxes on any income other than wages paid to a nonresident alien?

• Is your business a partnership or corporation?

• Is your business involved with mortgage investments?

• Is your business involved with real estate conduits?

• Is your business involved with nonprofit organizations?

• Does your business handle estates, trusts, or IRAs?

• Do you file a return for tobacco, employment, alcohol, firearms, or excise taxes?

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