With the growing complexity of federal regulations, many businesses in Chicago need the expertise of a local counsel to navigate the government's reporting requirements. Understanding how to obtain and use a federal identification number (FEIN) is important across a variety of industries, from food service to software to film and television production. To help you understand these rules, UpCounsel has found the top legal experts to offer insight into local regulations regarding obtaining and using a federal ID number.

What is a Federal Tax ID Number?

A federal tax identification number (FEIN) is generally used as a unique identifier of an entity like a business, partnership, or corporation for the purpose of filing taxes. An FEIN looks like this: 12-3456789. Businesses are responsible for obtaining their own FEIN. Alternatively, some individuals may be assigned an FEIN for tax purposes.

How to Obtain a Federal Tax ID Number in Chicago

To get a federal tax ID number, business owners in Chicago will have to apply for one obtainable through the Internal Revenue Service (IRS). This process is conducted online or via the mail. After completing a form and filing it with the IRS, business owners can expect to receive the FEIN back from the IRS within four weeks of submission.

When to Use a Federal Tax ID Number

It is important to use the FEIN assigned to a business whenever filing taxes. Business owners should also provide the FEIN on invoices and any time the business is part of a financial transaction. The FEIN is also useful for opening a separate bank account for the business.

How to Make Changes to Your Federal Tax ID Number

If any changes occur to the business' name or primary location, the business owner must fill out a Form 8822-B to notify the IRS. This typically happens if the business moves, changes its name, or switches to a new type of entity. The IRS must receive this form within 60 days after any changes have been made.

Responsibilities and Penalties

Failure to obtain and use a valid FEIN for the company or business may result in a hefty penalty of up to $10,000. Additionally, businesses are responsible for keeping the FEIN on file for 7 years. Businesses can update their information with the IRS at any time; however, it is their responsibility to keep the IRS informed.

Generally, businesses should expect to receive a Notice CP 299 from the IRS if they have failed to use the correct FEIN when preparing and submitting returns.

Final considerations

Understanding local regulations regarding obtaining and using a federal tax identification number is important for businesses in Chicago. An FEIN is used for filing taxes and making any financial transactions and it is the responsibility of business owners to obtain one and use it correctly. Failure to do so can result in hefty penalties. Luckily, UpCounsel has the top legal experts to provide the insight and understanding needed when navigating the government's complex reporting requirements.

Topics:

Federal ID Number,

Local Regulations,

Obtaining a Federal Tax ID Number