What Is an FEIN and Why Does Your Business Need One?
As you venture into the exciting territory of business ownership, you’ll likely need to familiarize yourself with many payroll acronyms, including the one we’ll discuss below. If this is the first time you’ve heard of it, you might be wondering, “What does FEIN mean?” FEIN stands for Federal Employer Identification Number, and most — but not all — businesses have one on file with the Internal Revenue Service (IRS) for tax purposes.
Let’s find out how an FEIN factors into business ownership, its purpose, and how to apply for one.
There’s probably a good chance that the only time you’ve heard of an FEIN, or Federal Employer Identification Number, was through your employer. If you’re about to take the plunge into business ownership, the odds are good that you’ll have to apply for an FEIN.
The reason why is that an FEIN helps to identify a business entity and is used by Uncle Sam to better administer tax laws — and we know he’s always looking for his due when tax time rolls around. While an FEIN can be acquired from the IRS and is typically advised for all businesses, sole proprietors without employees are able to use their personal Social Security number in place of an FEIN.
Although you’ll often hear the terms FEIN and EIN used interchangeably, an FEIN refers exclusively to a Federal Employer Identification Number, while an EIN or Employer Identification Number can refer to either a federal or state identification number. Most states will require both an FEIN and an EIN, and it’s likely a requirement where you do business.
Just like your Social Security number is a unique identifier that belongs only to you — the 9-digit FEIN is unique to your business and cannot be issued to another company. Once assigned, your FEIN is permanent and will need to be used by your business when filing any of the following forms:
Form W-2 – Wage & Tax Statement
Form W-3 – Transmittal of Wage & Tax Statements
Form 1096 – Annual Summary and Transmittal of U.S. Information Returns
Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return
Form 941 – Employer’s Quarterly Federal Tax Return
Schedule C – Profit or Loss from Business
Form 1065 – U.S. Return of Partnership Income
Form 1120 – U.S. Corporation Income Tax Return
Though any business, even sole proprietors, can apply for and receive an FEIN, there are some instances when an FEIN is a requirement. If any of the following apply to you, you are required to obtain an FEIN from the IRS:
You have employees or plan to hire employees
Your business is a corporation or partnership
You are required to file a tax return for employment, excise, alcohol, tobacco, and firearms
You are considering applying for a business loan
You withhold taxes on income (other than wages) paid to a non-resident alien
You have a Keogh plan
The IRS lists other scenarios to help determine whether an FEIN is required.
The easiest, and quickest, way to get an FEIN is to apply online at the IRS website. Before beginning the application, take a look at the EIN Assistant, which helps you determine whether you need an EIN or a new EIN. Independent contractors or small businesses without employees can still use their Social Security number as identification if they meet the criteria.
If eligible, click on the “Begin Application” button to get started. Set aside 15–20 minutes to complete it — there’s no option to save and return later, and the session times out after 15 minutes of inactivity.
Once your application is approved, you’ll receive a CP-575 form letter digitally from the IRS. This serves as a business verification document and includes your new FEIN, your official business name and address, and a list of required tax forms.
If you’d prefer not to apply online, you can also apply for an FEIN by fax or mail:
Faxed applications are typically processed within four business days.
Mailed applications may take around four weeks.
Use IRS Form SS-4 to apply by fax or mail.
International applicants can apply by phone.
For fax or mail, you’ll receive your CP-575 verification letter by mail, usually within 4–6 weeks.
