Getting a federal tax identification (ID) number is an important first step when you start your business.

According to the IRS, a federal tax ID number is used to identify a business. There are many reasons why a business may need one, including paying employees, claiming benefits and filing and paying taxes.

Here’s how to figure out if you need a federal tax ID number, how to apply for one and when your business should use it.

Federal tax ID number versus EIN

In short, a federal tax ID is the same as an EIN. As is often the case in business, though, you’ll hear several acronyms that all reflect the same concept. These acronyms can be confusing, but here is a clear breakdown of what each refers to and how they differ.

  • The federal tax ID number is also known as the TIN.
  • Another acronym for the federal tax ID number is the EIN, which stands for Employer Identification Number. An EIN must come from the IRS in order to be a federal tax…

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