Home Income Tax A Guide To Federal Tax ID Numbers

A Guide To Federal Tax ID Numbers

A Guide to Federal Tax ID Numbers


A Federal Tax Identification Number, also known as an Employer Identification Number (EIN), is a unique nine-digit number assigned to businesses by the Internal Revenue Service (IRS). The EIN serves as a way to identify a business entity for tax purposes and is required for a variety of business-related transactions. In this article, we’ll provide a comprehensive guide to Federal Tax ID Numbers, including what they are, why they’re important, and how to obtain one.

What is a Federal Tax ID Number?

A Federal Tax ID Number is a unique identifier assigned to businesses by the IRS for tax purposes. It is similar to a Social Security Number, but it is used exclusively for business entities. The EIN is a nine-digit number, and every business, regardless of size or legal structure, is required to have one.

Why is a Federal Tax ID Number Important?

A Federal Tax ID Number is essential for a variety of business-related transactions. It is required to open a business bank account, to apply for business licenses and permits, to apply for loans, and to file tax returns. The EIN also serves to distinguish a business entity from the personal identities of the business’s owners, protecting their personal finances from the liabilities of the business.

How to Obtain a Federal Tax ID Number

To obtain a Federal Tax ID Number, businesses must apply directly to the IRS. The application process is free, and businesses can apply online, by mail, by fax, or by phone.

The online application process is straightforward and can be completed in a matter of minutes. Businesses must provide basic information about their legal structure, business activities, and ownership. After submitting the application, the EIN is immediately issued.

Applying by mail, fax, or phone is also an option, but processing times are slower than the online application process. To apply by mail, businesses must complete Form SS-4 and submit it to the IRS. The processing time for mailed applications is generally 4-6 weeks. Fax applications require the same Form SS-4 and can be processed within a few business days. Phone applications are limited to international applicants only and require a U.S.-based third-party agent.


A Federal Tax ID Number is an essential element of doing business in the United States. It provides a way to identify a business entity for tax purposes and is required for a variety of business-related transactions. Fortunately, the application process is simple and straightforward, and businesses can obtain an EIN quickly and easily. By understanding the importance of Federal Tax ID Numbers and the application process, business owners can ensure they are operating legally and efficiently.

A federal tax id number is an essential organizational method employed by the Internal Revenue Service. A federal tax id number is crucial to streamline the tax levy of the Federal Government. The necessity stems from the number of taxpayers (both individuals and businesses) in the United States. A federal tax id is in essence a tax file number that categorizes and records each taxpayer’s application and status.

All individuals associated with running a small or big business utilizes tax id numbers or employer identification numbers. Each tax file number is registered with the Internal Revenue service through the employer’s identification system. A federal tax id consists of nine digit numbers. Each set of numbers is recorded by the IRS and the appropriate federal tax id is stored as the employer’s tax account.

Although both forms of identification are nine digits, a tax identification number is held separately from a social security number. The need for a tax file numbers arises when the individual worker or owner of the business has an incorporated business, employees working under the business, or is engaged any money-making investment or policy associated with a business model.

In essence, the federal tax id is crucial because all individuals who earn an income or profit are subjected to a federal income tax. Without filing a small business could effectively evade taxes, not only would this result in an illegal practice but the necessary obtainment of funds for the federal government would not be realized.