What is federal tax ID number?

If you’re starting a business, one of the first things you’ll need to understand is the federal tax ID number also known as an Employer Identification Number (EIN). This unique number is issued by the IRS and is used to identify your business for tax purposes. Whether you're hiring employees, opening a business bank account, or applying for licenses, a federal tax ID number is often required. In this blog, I’ll break down what it is, who needs one, and how to get it.

What Is a Federal Tax ID Number?

A federal tax ID number formally called an Employer Identification Number (EIN) is a unique nine-digit number the IRS gives to businesses. Think of it as the business version of a Social Security number.

This number helps the government identify your business for tax purposes. It’s used when you file federal taxes, hire employees, open business bank accounts, apply for licenses, or pay payroll taxes. Even if you’re running a small operation or just freelancing, having a federal tax ID number can make life easier and safer by keeping your personal info private.

How to Get a Federal Tax ID Number (EIN)

Getting your EIN is easy, free, and can be done online in about 10–15 minutes. Here’s how:

Step 1: Register Your Business With Your State

Before applying for a federal tax ID, make sure your business is registered. You’ll need to provide your legal business name, structure (LLC, sole proprietorship, etc.), and formation date.

Step 2: Gather Required Info

To fill out the EIN application, you’ll need:

• Business name and address

• Your name and personal SSN or ITIN

• Business type and formation details

• Number of employees (even if it’s zero)

• Date you started (or plan to start) operating

Step 3: Apply Online at IRS.gov

Go to the IRS EIN Assistant (official site only). Answer the questions, submit your application, and you’ll get your EIN immediately as a downloadable letter in PDF form.

You can also apply by fax or mail using Form SS-4, but it’ll take longer up to 4 weeks for mail or about 4 days by fax. International applicants must apply by phone.

Do I Need a Federal Tax ID Number?

Not every business is legally required to have one, but many are. You’ll definitely need a federal tax ID number if any of the following apply:

• You hire employees

• Your business is a corporation or partnership

• You file taxes for excise, employment, or special taxes (like tobacco or alcohol)

• You withhold taxes on payments made to non-resident aliens

• You offer a Keogh retirement plan

• You work with estates, trusts, or nonprofits

Even if you don’t fall into those categories, you might want to get an EIN anyway. It’s often required when opening a business bank account or applying for certain licenses. Plus, using an EIN instead of your personal Social Security number adds a layer of privacy and professionalism.

EIN vs. Other Types of Tax IDs

There’s often confusion between tax ID numbers, EINs, and other IRS identifiers. Here’s a quick table to help make it simple:

When Should You Apply for an EIN?

It’s best to apply for your federal tax ID number right after you register your business with the state. That way, you can take care of all other steps like setting up your bank account, applying for licenses, and hiring without delay. Don’t wait until tax time or after you hire someone. Get your EIN early so you’re prepared from day one.

What Information Is Required to Apply for a Federal Tax ID Number?

When you apply for a federal tax ID number, the IRS will ask for a few basic details about you and your business. You’ll need to provide your full legal business name exactly as it’s registered, along with your name as the person responsible for the business. The IRS refers to this person as the responsible party, and they must also give their Social Security Number or Individual Taxpayer Identification Number. You’ll be asked to share the business address, the date your business started or will start, and the type of business structure you’ve chosen like LLC, corporation, or sole proprietorship. 

You should also know whether you’ll have employees within the next 12 months and what your business actually does. This includes a brief explanation of your business activity or industry. Having all of this ready before starting the application can make the entire process smoother and faster.

Can Sole Proprietors Use Their SSN Instead?

Yes, technically, a sole proprietor without employees can just use their SSN. But that doesn’t mean it’s a good idea. If you plan to open a business bank account, issue invoices, or work with clients who ask for tax info, having an EIN looks far more professional and it protects your personal SSN from being widely shared. Even if it’s optional, a federal tax ID number is a smart move.

Do You Need a New EIN if Your Business Changes?

If your business changes structure say, from a sole proprietorship to an LLC or from an LLC to a corporation you’ll likely need a new EIN. But if you simply move locations, change your business name, or bring in a new partner (in some cases), you might be able to keep your current number. When in doubt, check directly with the IRS or a trusted accountant.

What to Do If You Receive an EIN You Didn’t Request

If you get a federal tax ID number (EIN) that you didn’t apply for, don’t ignore it. It could be a simple mistake or a sign of business identity theft. First, check if someone you know (like a partner or accountant) applied on your behalf. If not, report it to the IRS right away using Form 14039-B, the Business Identity Theft Affidavit.

Here’s a quick summary of what to do:

Acting fast helps you avoid future problems with taxes, fraud, or legal issues tied to that EIN.

Can You Cancel or Deactivate an EIN?

You can’t technically cancel an EIN. Once it’s assigned, it belongs to your business permanently even if you stop using it. But if you close your business, the IRS can mark the number as inactive once all your final tax returns are filed and paid. Just send a letter to the IRS with your business name, EIN, and the reason for deactivation. Make sure all taxes are settled first.

How to Cancel, Close, or Deactivate a Federal Tax ID Number

A federal tax ID number, once issued by the IRS, is permanent. That means you can’t technically cancel it. However, if you’ve stopped operating your business and no longer need the number, you can ask the IRS to deactivate it. This simply marks the number as inactive in their system. To do this, you’ll need to send a written letter to the IRS, explaining that your business has closed and that you no longer require the EIN. 

Make sure the letter includes your business name, EIN, and address, along with a clear reason for shutting things down. Before the IRS can mark your EIN as inactive, you must file all required tax returns and settle any outstanding taxes. If everything is in order, the IRS will treat your EIN as no longer in use, though it will still be attached to your business in their records.

What About State Tax ID Numbers?

A state tax ID number is different from your federal tax ID number. It’s issued by your state government and used for paying state income tax, sales tax, or employment-related taxes. You may need one depending on your state’s rules and whether you’re selling goods, hiring workers, or collecting sales tax. Be sure to check your state’s business registration website.

How SK Financial CPA Can Help You With Your EIN

We’ve helped thousands of clients from freelancers to full-scale companies get their EINs, file taxes, and stay fully compliant with IRS rules. Our team makes sure everything is done right the first time so you avoid delays or mistakes that could cost you time or money.

We don’t just file your forms. We guide you through every step, explain the why behind each process, and help you understand what your business actually needs. With over 23 years of experience and more than 20,000 tax returns handled, we’re here to simplify your business journey. Book a free consultation today.

Final Thoughts

A federal tax ID number is a key part of running a legitimate and organized business. Whether you're filing taxes, hiring employees, or separating personal and business finances, getting your EIN early can save you trouble later. If you need help applying or understanding your options, We are here to guide you every step of the way. Book a free consultation today and get the support your business deserves.

FAQs

Is a federal tax ID number the same as an EIN?

Yes. The terms are used interchangeably. Both refer to the nine-digit number assigned by the IRS to identify your business.

How long does it take to get a federal tax ID number?

If you apply online, you’ll get it instantly. Fax applications take 4 business days; mail applications take about 4 weeks.

Can I get an EIN without a Social Security number?

Generally, you’ll need an SSN or ITIN to apply. However, international applicants without one can still apply by mail or phone with Form SS-4.

Is there a fee to get a federal tax ID number?

No. It’s 100% free if you apply through the official IRS website. Don’t fall for sites that charge a fee.

Can I use one EIN for multiple businesses?

Only if it’s the same legal entity. If you start a new LLC or corporation, you’ll need a separate EIN for that new business.

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