Wondering what an FEIN is, who needs one and what it's used for? You're in the right place. You could already have an FEIN but didn't know what it was, or you might need to get one today to finish a workers' comp insurance application. It's easy, fast and uncomplicated. Simply by answering a few basic questions, you can get your FEIN directly from the IRS using their online application.
An FEIN is a Federal Employer Identification Number. It's commonly referred to by the IRS as an EIN (Employee Identification Number). The IRS uses these 9-digit numbers to track business tax obligations, much like they do your SSN (Social Security Number) on a personal level.
You'll use your FEIN when you remit payroll taxes on behalf of employees. There will be a place for it on the tax forms you fill out for the government and on the W-2 documents you provide your employees.
If you have one or more employees, you'll need to take the following amounts out of their paychecks and send the payments to the IRS:
As their employer, you'll also need to send the IRS your share of their payroll taxes, which is the same amount as they pay: a total of 7.65% of their gross paycheck.
You can also use your FEIN to do things on behalf of your business, just like you use your SSN as an individual:
Finally, you'll need an FEIN if you are attempting to buy Colorado workers' comp insurance for your employees.
If you've got your own small business and/or pay any employees, you need an FEIN. You can't legally hire any employees without one, including many household workers. Here are some examples of when you need an FEIN:
If you hire someone who must work in your home and obey your directions as to how they complete their work, they are an employee. If you pay these kinds of household workers $2,200 or more per year (as of 2020), you'll have to withhold payroll taxes, under the Federal Insurance Contributions Act (FICA).
If you are hiring people to work in your company, and they aren't contractors (if you control when, where and how they work, they probably aren't contractors), they are employees. You'll need an FEIN so you can handle their withholding and remit their payroll taxes to the IRS.
If you've been in business for years as a sole proprietor, you may never have had to get an FEIN. You should anyway—FEINs can help protect you from identity theft by replacing your SSN in multiple databases. But the minute you plan to hire an employee, you will legally need an FEIN to manage taxes and get a workers' comp quote. There's really no downside to having and using an FEIN as a sole prop.
If you need an FEIN, getting one is fast and easy. Just go to the IRS website, make sure you are eligible and fill out the application online. The IRS will validate your information (which usually only takes a few minutes), then issue your EIN immediately via email. It's that simple. Once you have your FEIN, you can hire employees, set up accounts for your business with banks and utilities and get a quote for Colorado workers' comp insurance in minutes.