Taxpayer identification numbers (TINs) play a vital role in the United States tax system. They help the Internal Revenue Service (IRS) track whether individuals and businesses file taxes and comply with the law.
Three TINs stand out as the most commonly used in the U.S.:
- Individual taxpayer identification number (ITIN)
- Employer identification number (EIN)
- Social Security number (SSN)
In this article, we’ll compare ITINs versus EINs and SSNs. The TIN you need to fulfill your tax liability will vary depending on whether you’re a U.S. citizen worker, a business owner, or a foreign national. We’ll also discuss how to get an ITIN, EIN, or SSN and how these numbers are used.
What is an individual taxpayer identification number (ITIN)?
An ITIN is a unique number the IRS issues to certain foreign individuals in the U.S.—residents and nonresidents—for tax purposes.
It always begins with the number “9” and follows the same format as an SSN, like this:
9XX-XX-XXXX
An ITIN is for individuals, not businesses, and covers a range of people who can’t get an SSN but still need to pay taxes, including:
- Certain nonresident and resident aliens
- Spouses and dependents of U.S. citizens who hold nonresident alien visas without permanent residency
- Nonresident aliens who must file tax returns or claim tax treaty benefits or exceptions
Owners of foreign entities operating in the U.S.—including corporations, partnerships, and limited liability companies—also need an ITIN.
To get an ITIN, you’ll need to file Form W-7 with your federal income tax return with proof of your foreign status, such as a copy of your passport, national identification card, or visa.
Once you’ve gathered these documents, mail them to the IRS or apply in person with an IRS-authorized Certifying Acceptance Agent. You can also book an appointment at your local IRS Taxpayer Assistance Center.
What is an employer identification number (EIN)?
An EIN is a nine-digit number the IRS issues to identify businesses for tax-filing purposes. It’s also required when completing business paperwork. Business owners can use it instead of their ITIN or SSN.
Here are several other essential business functions that require an EIN:
- Open a business bank account: Most financial institutions require an EIN to open a business account.
- Incorporate or hire employees: A business owner needs an EIN to hire employees. A corporation needs an EIN, even if owned and operated by one person, as its owner is technically an employee.
- Take out business credit: Business credit differs from personal credit and requires an EIN.
- Establish a pension, profit-sharing, or retirement plan: Plan administrators need an EIN.
Wondering how to get an EIN? You can apply for free online or by contacting the IRS by phone, fax, or mail. Be sure to have your SSN or ITIN handy when applying.
To apply online, visit the IRS website’s EIN application page. Once the website validates your information, you’ll be immediately issued an EIN. If you’re applying over the phone, note that the number is not toll-free. Applying by mail takes four weeks to process, whereas applying by fax takes four days.
What is a Social Security number (SSN)?
An SSN is a unique nine-digit number assigned to U.S. citizens and permanent residents, including those with lawful alien status. Temporary nonimmigrant workers with eligible visas can also apply for an SSN.
An SSN is used to file personal income tax returns. The government uses SSNs to track workers’ earnings and years worked. When workers retire, the government uses this information to determine their entitlement to Social Security benefits.
To get a Social Security card, you must complete Form SS-5. Before applying, gather all the documents, such as your birth certificate, passport, or permanent resident card, to prove your citizenship or immigration status, eligibility to work, age, and identity. Then contact the Social Security Administration or visit your nearest Social Security office (first-time applicants can’t apply online).
Note: You can’t have an SSN and an ITIN simultaneously. If you have an ITIN and then obtain an SSN, the ITIN will be deactivated.
Differences between an EIN vs. ITIN vs. SSN
To summarize, here are the main differences between these three types of TINs:
- ITIN vs. SSN: An SSN identifies U.S. citizens and permanent residents, including those with lawful alien status. An ITIN is an identification number for U.S. resident or nonresident aliens who can’t get an SSN. Both are used by individuals when filing individual tax forms, such as Form W-9 or Form W-4.
- EIN vs. SSN: An EIN is an ID number businesses obtain to conduct activities like opening bank accounts and establishing pensions. It’s strictly for businesses, whereas an SSN is for individuals.
- ITIN vs. EIN: An ITIN is for certain individuals (U.S. residents and nonresidents with foreign status), whereas an EIN is only for businesses that operate in the U.S.
Which tax identification number should I use?
Most business entities registered with the IRS will need an EIN, even if they don’t plan to hire employees. An EIN allows you to open a business bank account and keep your business and personal tax records separate.
ITINs and SSNs are only necessary for businesses that don’t file their taxes separately from the owner. For example, disregarded entity LLCs and sole proprietorships without employees use the owner’s ITIN or SSN because revenue is recorded on the owner’s returns.
Tax compliance is vital to avoiding serious consequences, such as penalties from the IRS or even jail time for nonpayment. Here are some tips to remain on top of your taxes:
- Request ITINs or SSNs from your employees for payroll processing: You need your employees’ ITINs or SSNs so you can pay them and file Form W-2 for each one. Nonemployee workers must also provide their tax ID number so you can file Form 1096. Their status as U.S. citizens, permanent residents, or legal aliens will determine the number they use.
- Use your EIN for tax filings and payroll purposes: Use your EIN on all business and payroll tax paperwork. When completing forms, use your EIN where an individual would use their SSN or ITIN.
- Keep your business and personal finances distinct for tax purposes: Unless your business’s taxes are filed under your name, you should keep them separate. In other words, file business taxes using your EIN and file personal taxes using your SSN or ITIN.
Oyster helps you stay compliant
Efficiently managing your employees’ tax identification numbers ensures accurate payroll, prevents costly penalties, and helps you comply with tax regulations. With Oyster’s global employment platform, businesses can streamline this process effortlessly. Our centralized hub facilitates tax, payroll, and local legal compliance in 180+ countries, making it easier to operate both in the U.S. and internationally.
Partner with Oyster today for global compliance assistance you can trust.
FAQs
Still have questions regarding taxpayer identification numbers? We have answers:
Can I use an EIN in place of an SSN?
EINs and SSNs aren’t interchangeable. An EIN is strictly for business use, whereas an SSN is for personal use. Be sure to file your business tax returns under your EIN (if your business is a separate tax entity) and your individual tax returns under your SSN.
Can I start a business with an ITIN number?
Yes, you can start a business with an ITIN number, just like you can with an SSN. If you have the right to work in the U.S., you can run an LLC. You will need an EIN to form a corporation, hire employees, or perform certain business functions.
Is there a downside to getting an EIN?
There aren’t any downsides to getting an EIN, but you should be aware of the following:
- Tax returns: Once you have an EIN, you must file tax returns for your business.
- Application and filing method: You can only select one application and one filing method.
- Apply in one sitting: If you’re requesting your EIN on the IRS website, you must complete it in one sitting. The session expires after 15 minutes. Make sure you have the necessary documents on hand before you begin.
About Oyster
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