What Are the Differences Between Tax ID Number, Employer ID Number, Social Security Number and Individual Taxpayer Identification Numbers?

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Taxpayer identification numbers issued by IRS in the United States

As a small business owner working in the United States or servicing clients outside the U.S., you need to know how to get your taxpayer identification number, the different kinds of tax identification numbers and their respective purposes.

Different Types of Taxpayer Identification Numbers

There are basically five types of taxpayer identification numbers:

  • Social Security Number (SSN)
  • Employer Identification Number (EIN)
  • Individual Taxpayer Identification Number (ITIN)
  • Taxpayer Identification Number for Pending U.S. Adoptions (ATIN)
  • Preparer Taxpayer Identification Number (PTIN)

What Are the Structures of Different Types of Taxpayer Identification Numbers?

Similarities between different tax ID numbers

The structure of a TIN can tell you what it is if you are careful to learn them from this blog, Entrepreneur Business Blog. By merely looking at the specific format of a TIN, you can tell whether it is a social security number (SSN), employer identification number (EIN) or an individual taxpayer identification number (ITIN).

A Social Security Number (SSN) looks like this: xxx-xx-xxxx. The first three digits used to be known as the area number, the next two digits used to be known as the group number, and the last four digits were always random. 

However, to increase the security features of the SSN and curtail the cases of fraud in the United States, SSNs are now all issued at random, so new SSNs do not have geographical significance in the first three digits. 

An Employer Identification Number (EIN) has the following format: xx-xxxxxxx. And an Individual Tax Identification Number can easily be recognized, because it always starts with the number 9, and it is 9 digits long. It has the following format: 9xx-xx-xxxx.

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What Are the Differences Between a Tax ID, Employer ID, and ITIN?

A Taxpayer Identification Number according to the US Internal Revenue Service is an identification number used in the administration of tax laws. IRS designates the types of numbers that it allows to be used for tax and identification purposes.

Tax ID numbers are primarily used to track payments to individuals for federal income tax and other tax purposes, but they have also become used for a variety of identification purposes. This comes in handy when preparing for the tax season.

The three general types of taxpayer ID numbers are:

  • Social Security Number (SSN)
  • Individual Taxpayer ID Number (ITIN)
  • Employer ID Number (EIN)

Beyond these three general types of tax ID numbers, the Internal Revenue Service has two other taxpayer identification numbers called; the ATIN and the PTIN. 

ATIN is a special type of tax ID number for pending adoptions while PTIN is for tax preparers.

Social Security Number

A Social Security number (SSN) is the 9-digit pin found in your social security card issued by the US to all citizens, permanent residents and temporary (working) residents.

Social Security Number is used mainly for personal identification and tax purposes. As an individual in the United States, you must have a Social Security number before you can get a job and receive your Social Security benefits.

SSNs are used by employers to report the annual income of employees for their income tax returns.

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Here are other times your Social Security Number might be requested:

  • To open a bank account
  • To apply for a passport
  • On a federal student loan application
  • To apply for Medicare and Social Security benefits
  • To apply for public assistance, including unemployment benefits
  • To check credit

Individual Taxpayer ID Number (ITIN)

Different types of taxpayer identification numbers

An ITIN is for people who aren’t eligible to receive a Social Security Number or Employer ID Number. An employer can accept an ITIN from an individual for tax purposes (for filling out a W-4 form at hiring time, for example).

The IRS issues ITINs to people who need a tax identification number to process tax returns and payments.

Who might need an ITIN:

  • A non-resident alien who is filing a U.S. tax return and not eligible for an SSN
  • A U.S. resident alien (based on days present in the United States) filing a U.S. tax return and not eligible for an SSN
  • A dependent or spouse of a U.S. citizen/resident alien
  • A dependent or spouse of a non-resident alien visa holder

ITINs are for tax-reporting purposes only; the number cannot be used for identification purposes. The IRS emphasizes that the ITIN is NOT used:

  • To authorize someone to work in the United States
  • To make someone eligible for Social Security benefits, or
  • To qualify a dependent for an Earned Income Tax Credit (EITC).

ITINs are issued regardless of immigration status because both resident and non-resident aliens may have U.S. tax returns and payment responsibilities under the Internal Revenue Code.

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Employer ID Number

An Employer ID (or EIN) is a federal tax identification number for businesses. It’s what the Inland Revenue Service (IRS) uses to identify your business for taxation. You don’t have to have employees before you will be required to have an Employer Identification Number (EIN).

Some other areas that your Employer ID Number will be required include: to pay your business income tax, business bank account opening, business loan application in the United States, business licenses and permits issuance and for reporting and paying federal payroll taxes.

Having read through to this point, it’s time to learn about the tax laws and how to apply for the federal tax ID number.

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