What Is a Federal Tax ID Number? | Chase for Business

Obtaining a federal tax identification number (ID) is an important first step when starting your own business.

According to the IRS, a federal tax number is used to identify a business. There are many reasons a business might need it, including paying employees, applying for benefits, filing, and paying taxes.

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

Federal tax code with respect to EIN

In short, a federal tax number is the same as an EIN. As is often the case in business, however, you will hear several acronyms all reflecting the same concept. These acronyms can be confusing, but here’s a clear breakdown of what each refers to and how they differ.

  • The federal tax number is also known as the TIN.
  • Another acronym for the Federal Tax Code is EIN, which stands for Employer Identification Number. An EIN must come from the IRS to be a federal tax number and is used to identify a business entity.
  • An EIN can also be called FEIN (Federal Employer Identification Number).

Does my business need a federal tax number?

A business needs a federal tax number to apply for a bank account or business loan. Here are many more questions to help you figure out if your business might need a federal tax number:

  • Do you have employees?
  • Do you withhold tax on any income other than the salary paid to a non-resident alien?
  • Is your business a partnership or a company?
  • Is your business involved in mortgage investments?
  • Does your business deal with real estate pipelines?
  • Is your business involved with non-profit organizations?
  • Does your business manage property, trusts or IRAs?
  • Do you file a declaration for tobacco, work, alcohol, firearms or excise duties?

If the answer to any of these questions is yes, it is likely that your company needs a social security number. 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 meets the tax exemption requirements before applying for an EIN.

After applying for an EIN, tax-exempt companies have three years to prove their status. You don’t want to spend all that time trying to jump through the hoops and legal requirements to meet tax exemption regulations.

How to apply for a federal tax number

Once you determine that your business needs a tax number, you will work with the IRS to get one. You can apply online; other options include telephone, mail or fax.

A federal tax number is free, so avoid any scam trying to get you to pay an EIN. The IRS administers and issues tax numbers to businesses in the United States, so you can apply directly to IRS.gov.

Here are the three key steps:

1. Make sure your business is qualified

To qualify for an EIN, your company must operate in the United States. As an entrepreneur applying for the EIN, you must have a valid tax identification number, such as a social security number or an individual tax identification number. Check the list of questions above to see if your company is eligible for a federal tax number. You can also find helpful information in the IRS online 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 held responsible for the business. The accountable party is the person who controls or owns the business entity and maintains the greatest control over business decisions.

3. Receive your federal tax number

After submitting the online application with all the required information, you should receive your federal tax 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 have your EIN, meet with a local corporate banker to find out how a corporate bank account can help you get started on the right foot 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 / recommendations for any individual. You should carefully consider your needs and goals before making any decisions and consult with the appropriate professionals. Past prospects and performance are no guarantees of future results. JP Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult with your tax, legal and accounting advisors.

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