What is a Federal Tax Identification Number?

Answer:
A federal tax identification number, also

known as an employer identification number(EIN), is a unique number issued by the IRS to a specific business, company or partnership. The EIN or federal tax identification number is used primarily for bookkeeping purposes, such as ensuring that taxes withheld from employees are credited to the proper business account.

Obtaining a federal tax identification number is not a requirement for every type of business in operation, but generally if the company has paid employees, a Keogh plan (401K), and/or pays employment or excise taxes the IRS will require an EIN application. As long as the company has applied for a federal tax identification number, however, the IRS can still account for any tax payments collected or owed. The company can put the words "applied for" and the date of application in the line designated for an EIN or federal tax identification number.

There are a number of ways for a new company to obtain a federal tax identification number. One of the easiest and fastest methods is to apply for an EIN through the official IRS government website. The form will ask for specific information about the company, such as the physical location, official company name, incorporation status and so on. Once the form has been submitted electronically, a unique EIN should be issued soon afterwards. This federal tax identification number is for business purposes only, since it is attached to the company itself, not individual officers or employees.

Business owners can also obtain an EIN by calling a special toll-free number provided by the IRS. An authorized person can call the number, provide the IRS employee with requested information and get an EIN immediately. Faxing a completed form known as an SS-4 to a state IRS office should also result in a faxed response containing an assigned federal tax identification number.

An EIN belongs to a specific business under specific ownership or control. If the company is sold or ownership is otherwise transferred, the new owners must apply for a new EIN in order to avoid confusion with the former entity's tax records and other financial concerns.


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