About Federal Tax ID Numbers

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A federal tax ID number is assigned to businesses with employees and to some entities that have no employees. The nine-digit number is used by the federal and state governments for reporting and tracking businesses. The employer identification number (EIN) as it is referred to must be used solely for business purposes.

Applying for a EIN

  • The preferred method of applying for a federal ID number is via the IRS website. The application is filled out online and submitted. The number is given to the businessperson immediately. The other method for applying for the EIN is by telephone. The businessperson fills out the SS-4 Form beforehand so that he is ready with all of the applicable answers for the telephone call. Faxing and mailing applications is also common.

Uses for the EIN

  • The federal tax ID number is written on all documents sent to the government. The businessperson who needs to apply for a state sales tax number must have the EIN in order to apply for the state tax number. The number is used on all W-2 forms and all variations of the 1099 form given out. The number is used to track taxes paid or owed by the business including payroll taxes, unemployment taxes, social security and Medicare taxes.

Entities that Need the EIN

  • Individuals conducting business who plan to have deductions should have the EIN for business. Sole proprietors, corporations, partnerships and trusts need an EIN to conduct business. Estates, plan administrators, employee plans and exempt organizations will need to have a federal ID number. Entities that have a prior EIN may not need to request a new number if certain information has not changed. Changing a business name does not require a new number.

Number Types

  • For a business, the federal ID number use nine numbers and a dash (39-4564323). If the tax number is for a plan, the nine-digit number can be followed with a "P" or a plan number (342). The number must be used in the way it appears when you received it. When using the number to file documents or filing tax forms, the entire number with dashes must be used.

Warnings

  • Individuals using a social security number for 1099-MISC reporting should apply for a federal ID number to conduct business. This prevents any possible issues that can arise from using a social security number to apply for contract work. The number, however, should never be used for any purposes outside of the business structure.

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