A Federal Tax Identification Number—most commonly an Employer Identification Number (EIN)—is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify a business for federal tax purposes.
What is a Federal Tax Identification Number (FTIN)?
A Federal Tax ID is the official number the IRS uses to track a business’s tax obligations. While “Federal Tax ID” is a broad term that can refer to different taxpayer identification numbers (such as Social Security Numbers, ITINs, or EINs), in the context of a business, it almost always refers to an EIN.
An EIN functions much like a Social Security Number for a business—it’s required to open U.S. business bank accounts, hire employees, file federal tax returns, and comply with other regulatory requirements. Even single-member LLCs with no employees often need one to work with payment processors, wholesale suppliers, or e-commerce platforms like Amazon, Shopify, and PayPal.
For non-U.S. residents, an EIN is essential to operate a U.S. company, especially for:
- Filing federal tax returns.
- Complying with IRS reporting requirements.
- Setting up merchant accounts and payment gateways.
- Applying for certain licenses or permits.
Obtaining an EIN involves submitting Form SS-4 to the IRS, either online (if eligible) or via fax/mail. Foreign applicants without a Social Security Number can still apply by providing alternative identification details and following the IRS’s foreign entity procedures.
While an EIN is sometimes called a Tax ID, it is specifically for business identification; individuals use a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) for personal tax purposes. Understanding this distinction is important for compliance and avoiding delays in banking or tax filings.
