If you are an entrepreneur or aspiring one, you’ll likely encounter the three important U. S. identification numbers:
However, an unavoidable question arises: “Which one do I need?”
Now, assuming you are wondering what SSN, EIN, or ITIN means; don’t worry! You are not alone. Read on as we take a look at these vital markers and explain how to tell which one is suitable for you and your company and if you qualify for the category.
This blog will help you see how identification numbers compare. To better understand SSNs, EINs, and ITINs and to learn when to apply for each of them.
What Is Tax Identification Number (TIN)?
Let’s start with a very fundamental question: Were you really aware that there is such a thing as a TIN or Tax Identification Number?
To simply put, TIN means Tax Identification Number which is used to refer to a unique number to identify an individual, a business, or a non-profit organization. A TIN is required by all and every firm. TINs are available in any country but how these numbers are acquired and what they look like may vary depending on various factors.
In the United States of America, if you file taxes with the Internal Revenue Service or IRS every year, then you need a valid TIN. These are nine-digit numbers that the authority (IRS) uses to identify the taxpayers. Take a look below to learn briefly about those:
- Social Security Numbers (SSN): An SSN, or Social Security Number is a TIN that issued by the Social Security Administration (SSA). SSNs became an identification number for U.S. citizens and authorized residents used in tracking Social Security coverage and tax records.
- Employer Identification Numbers (EIN): An EIN or Employer Identification Number is a nine-digit number issued and used by the IRS. An EIN can be obtained for identification purposes, tax administration, or employment tax reporting in the United States.
- Individual Taxpayer Identification Number (ITIN): An ITIN or Individual Taxpayer Identification Number is a United States tax-processing number that is used for individuals who are required by the Internal Revenue Service to have a United States taxpayer identification number, but are not eligible for an SSN.
- Adoption Taxpayer Identification Number (ATIN): An ATIN is a temporary tax identification number that the IRS issues to persons who are processing an adoption of a U.S. child but can’t obtain an SSN promptly for the tax return.
- Preparer Taxpayer Identification Number (PTIN): A PTIN is a unique identifier for tax return preparers who do federal tax returns for a fee. This Tax Identification Number is given by the IRS to make sure that every preparer is identifiable and to enforce their tax obligations.
It is a brief discussion of a TIN. To learn more about TIN, please visit our blog having the same name; Tax Identification Number (TIN).
TIN Vs. ITIN
Even though TIN and ITIN are similar terms, they stand for different things:
- TIN is an acronym for any specific tax identification number such as SSN, EIN, ATIN, and PTIN.
- ITIN is particularly beneficial for those who are eligible for a U. S. taxpayer identification number but don’t receive an SSN.
- Whereas, TIN represents numerous tax identification numbers of different organizations and the type of purpose, ITIN is for non-resident aliens, their dependents, and other individuals engaged in the U. S. business.
To learn more about TIN vs. ITIN, please check out our blog with the same title.
What Is an SSN?
We briefly explained SSN also known as Social Security Number for you to understand. Let’s delve into this a little further.
A Social Security Number is a number assigned to United States citizens and residents so that the government can keep track of their income and calculate their payments accordingly.
SSNs were introduced as a part of The New Deal in 1936 to aid citizens receive retirement and disability benefits. Originally intended to keep a record of how much an individual earned and to collect benefits, SSNs now also serve to identify people for taxation, calculate credit scores, and so on.
When you need to borrow money, open a bank account, receive assistance from the government, or purchase goods over a certain price, you are requested to provide them with your SSN.
Example of a Social Security Number (SSN)
123-45-6789
Here 123 is the area number, 45 is the group number, and 6789 is a serial number. Please note that this is just a fictitious case used for the purpose of an example.
Why Do I Need an SSN?
The importance of having a Social Security number (SSN) is self-evident because this affects your ability to receive future benefits from the U. S. government. The necessity of an SSN are shortly given below:
- For Employment: Upon getting a new job, your employer will require you to produce your SSN. It is used to inform the Internal Revenue Service of your income and to communicate Social Security wages to the Social Security Administration.
- Financial Transactions: You will require the SSN to handle personal financial issues and open bank accounts.
- Federal Loans: When one’s applying for a federal loan, like a student loan, the government will use their SSN to determine their eligibility.
- Medicare Enrollment: SSN is necessary for enrollment in Medicare since it is a federal agency that is regulated by the Social Security Administration.
- Passport Application: The Social Security Number is required for all applicants by federal law when applying for a passport in the US.
- Tax Purposes: SSN will be very important when filing income tax and applying for dependents for instance the children.
- Local Director: Those who want to act as a local director in an American company owned by foreigners should have a Social Security Number. This is important for signing official documents, conducting business transactions, and so forth.
- Driver’s License: Most states demand one to have his or her SSN in order to obtain a driver’s license or any other identification card.
How to Get an SSN?
Studies show that to obtain an SSN, one must be a citizen of the United States or an immigrant seeking asylum in the United States. To apply for SSN, one is required to visit a Social Security Administration office to fill out a form SS-5 from the SSA website, besides submitting original documentation that can provide proof of identity, age, and eligibility of an immigrant, for instance, a birth certificate, passport and immigration papers. The last step is to mail your SSN card after passing through the processing system.
What Is an EIN?
Now, let’s talk about another important identification number: EIN. That is also known as Employer Identification Number.
An Employer Identification Number (EIN) is a nine-digit number identified as a Tax I.D. or Federal Tax Identification Number (FTIN) issued by the Internal Revenue Service (IRS). It is socially roughly equivalent to the social security number. Known as the Web EDI Tax folder (WET) it is employed by the Internal Revenue Service (IRS) to monitor business tax returns and payments.
Thus, if you have a business venture or you are planning to hire employees necessary for your business, then you need to have an EIN for legitimacy purposes with the IRS. It will help in organizing things for tax purposes and also make the government to monitor your business accounts in order to facilitate taxation purposes.
Example of an Employer Identification Number (EIN)
12-3456789.
Like the example above this fictitious number will serve as a template for an EIN. In fact, there is another unique corpus for every single EIN assigned to a business or organization.
Why Do I Need an EIN?
Now, there are reasons why you will need an EIN for your business. They are:
- Tax Filing: One of the main purposes for acquiring an EIN is for tax filing. It is used by businesses for keeping records about income earned, tax, and other tax related obligations to the IRS.
- Hiring Employees: It is highly encouraged to acquire the EIN in order to deal with the payroll taxes, withholdings, and reporting issues.
- Opening Bank Accounts: An EIN is necessary for opening a bank account for a business in many banks.
- Applying for Loans: EINs are very useful when you are looking for business loans or lines of credit as it helps the lenders identify your business and assess its financial status.
- Legal Compliance: It is crucial to possess an EIN because your business will be considered as legal and follow the right taxation’s premises. It adds to your business to take its identity from the tax office as well.
- Non-residents: Many non-residents are required to obtain an Employer Identification Number (EIN) for tax filing, opening US bank accounts, acquiring US credits, and conducting commercial or investment transactions in the US.
How to Get an EIN?
An EIN is only applicable to individuals or entities that are active within the United States in business activities. Getting an EIN is not a difficult procedure. This can be accomplished through the IRS official website or by completing Form SS-4 by mail or in person by fax or with the help of any company formation service provider such as Business Globalizer.
Present all of the needed paperwork that verifies the authenticity of your business. Approval of the EIN will come from the IRS and it will be used in business and other tax obligations.
What Is an ITIN?
The next topic in our discussion is an ITIN – an Individual Taxpayer Identification Number.
An Individual Tax Identification Number (ITIN) is a number issued by the United State Internal Revenue Service (IRS) which helps solely in the processing of tax returns.
It primarily provides the purposes of allowing those not eligible for an SSN to meet the requirements of the U. S. tax laws. Among the grantees are non-resident aliens, certain resident aliens, and dependants or spouses of US citizens or resident aliens who are required to file or be able to file for a US tax return.
ITIN does not confer the blessed individual with a work permit nor enables him or her to receive social security. This is simply because it is for the IRS to monitor that even those who might not be legally registered in the country should ensure that they comply with the U. S tax code through filing their taxes.
Example of an Individual Taxpayer Identification Number (ITIN)
9XX-XX-XXXX
Just like the SSNs, ITINs have nine digits; however, the first digit in an ITIN is always 9 to differentiate it from an SSN. However, this is just a hypothetical scenario for the sake of explanation.
Why Do I Need an ITIN?
Now, you might be wondering, why exactly would you need an ITIN? Here are some key reasons:
- Tax Filing: For non-citizens who need to file U. S. tax returns but are not eligible for an SSN, an ITIN will be very helpful in the completion of their tax duties to the IRS.
- Claiming Dependents: The use of an ITIN enables one to claim dependents in the tax return for tax purposes.
- Opening U. S. Bank Accounts: There are some banks that may require an ITIN for non-residents who want to open bank accounts in the United States.
- Tax Withholdings: It is legal for employers to request ITIN for tax withholding if the applicant is not eligible for an SSN and is employed in the U. S.
It is, therefore, clear that an ITIN is important in meeting tax requirements, claiming dependents, and using the services of financial institutions in the United States.
How to Get an ITIN?
Individuals qualify for obtaining an ITIN if they are required to file a tax return with the United States but cannot obtain an SSN. This include non-resident aliens, resident aliens and there spouses and dependents.
To get an ITIN, one has to fill out form W-7, IRS Application for Individual Taxpayer Identification Number together with a tax return and documentation such as a passport or a birth certificate.
Also, you can get your ITIN through a Certified Acceptance Agent authorized by the IRS.
Note: We take pride in declaring that Business Globalizer is an IRS Certified Acceptance Agent (CAA). So if you need an ITIN, we could be your best option.
SSN vs. EIN vs. ITIN
Now, let’s explore the key differences between SSN, EIN, and ITIN:
- Purpose: SSN is used for tracking earnings and benefits while indirect tax and employment data for a business contractor is either EIN or ITIN.
- Issuing Authority: To obtain an SSN, an individual must apply through the Social Security Administration while to get an EIN, one has to apply through the Internal Revenue Service and for an ITIN, the applicant is also expected to apply through the IRS.
- Eligibility: Individuals who are eligible for SSNs can receive the unique eight-digit number that becomes their identification marker in the United States.
- Usage: These numbers are essential to identify individuals’ identity and for the representation of individuals for tax-reporting purposes who have no SSN.
SSN vs. EIN vs. ITIN Comparison Table
| Aspect | SSN | EIN | ITIN |
|---|---|---|---|
| Purpose | Personal identification and tracking earnings/benefits. | Business identification, tax filing, and employee hiring | Tax reporting for individuals without SSNs |
| Issuing Authority | Social Security Administration | Internal Revenue Service (IRS) | Internal Revenue Service (IRS) |
| Eligibility | U.S. citizens and eligible individuals | Businesses | Individuals without SSNs and with U.S. tax obligations |
| Usage | Personal identification | Business identification | Tax reporting and compliance |
With this, we complete the blog on the topic “SSN, EIN, or ITIN”.
This is just a basic comparison of SSN, EIN, and ITIN. If you are confused about the differences or they are too complex for you to understand, there is no need to panic: each of the comparisons is discussed separately in our blog posts. See our in-depth studies in ‘SSN vs. EIN,’ ITIN vs. SSN,’ and “EIN vs. ITIN” for more clarification.
FAQs
Q1: What is the new deal?
Answer: The New Deal was a series of projects started by Franklin D. Roosevelt in the early 1930s to help the United States get out of the Great Depression. It aimed to enhance the economy; reduce unemployment rates; provide welfare to the needy; and increase confidence in the government’s ability to cater to its citizens.
Q2: For an LLC, should I use an EIN or SSN?
Answer: You may be required to pay tax for your LLC using your EIN or SSN depending on your type of business entity. Multi-member LLCs that are filing taxes need to use an EIN. Social security numbers are accepted by sole proprietorships and LLCs with one member. One can also consult an expert about this.
Q3: For taxes, can I use my EIN instead of my SSN?
Answer: Yes, for tax purposes, if you are operating as a business entity you would use your Employer Identification Number (EIN) instead of your Social Security Number (SSN). Your EIN acts as a unique number used when you report your business income, file taxes, or meet other tax requirements.
Q4: Can individuals receive an EIN, or are they limited to businesses?
Answer: EIN is only for business. People can get an EIN by creating a legal structure such as an LLC or Corporation.
Q5: If I have an EIN, do I still need an SSN?
Answer: It is true that employees will still require SSN even though the firm may have received an EIN. SSN serves for personal identification purposes while EIN is used for federal tax identification and related obligations.
Q6: What happens if I use the wrong TIN on the return?
Answer: Failing to supply the right TIN when filing a tax return can lead to delayed processing, inaccurate taxation and penalties from the IRS.
Final Words
And here ends our blog on SSN, EIN, or ITIN. It is important to understand these differences to work within the tax system of the United States. SSNs are for individuals; EINs are for businesses; and ITINs are for foreign non-citizens who do not have SSNs but pay U. S. taxes. They serve different functions that facilitate effective tax filing and adherence.
