A tax ID, also known as a Taxpayer Identification Number (TIN), is a number assigned to individuals and organisations by the IRS (Internal Revenue System), primarily to distinguish that individual or organisation from millions of others out there. This helps the IRS to do things like track tax obligations and payments that are made to the IRS, and you can use it to do things such as file taxes, or with some tax ID numbers to take out loans.
Types of tax ID numbers
A TIN is a very generic term that refers to lots of different types of identifying numbers. There are 3 key types of tax ID number that you can use as identification for tax purposes:
- A Social Security Number (SSN)
- An Individual Taxpayer ID Number (ITIN)
- An Employer ID Number (EIN)
All of these can serve as your tax identification number, but can also serve as more than just that, depending on which one you go with. Let’s take a more in-depth look at all 3.
What is an ITIN and can I get one?
An ITIN is a nine-digit number, beginning with a 9, and is issued by the IRS, serving as a tax processing number. This number ensures that you’re always in compliance with U.S. tax laws, and helps the IRS to efficiently process and account for your taxes.
It is important to note ITINs aren’t for everyone; you are required to get one if you don’t have an SSN, and are ineligible for one, but are still required to file a federal income tax return. To be eligible you need to fit one of these:
- Non-resident alien filing a U.S. tax return, not eligible for an SSN
- U.S. resident alien filing a U.S. tax return, not eligible for an SSN
- Dependent/spouse of a U.S. citizen/resident alien
- Dependent/spouse of a non-resident alien visa holder
What can I do with an ITIN?
An ITIN isn’t much help unless you’re in one of the above categories. It’s for tax-reporting purposes only – it cannot be used for identification purposes. It also doesn’t authorise someone to work in the U.S. or make you eligible for Social Security benefits.
What is an SSN and who can get it?
A social security number is also a nine-digit number that the government issues. Only U.S. citizens, permanent residents, and non-immigrant working residents can get SSNs. The government uses this number for various things, such as tracking your lifetime earnings and the number of years you worked.
What can I do with an SSN?
Fortunately, an SSN allows you to do much more than an ITIN. With an SSN you can do the following:
- Open a personal bank account
- Be hired
- Apply for a passport or a federal student loan
- Apply for Medicare and social security benefits
- Apply for public assistance
- Check your credit rating
If you operate a sole proprietorship without employees, or a single-person LLC, your SSN is your tax number by default.
What is an EIN and who can get one?
An EIN is like an SSN, except just for your business. It allows the IRS to identify taxpayers and keep track of a business’ reporting. The requirements for getting an EIN are much more flexible; you can apply if your business is in the U.S., and if the person applying has a valid TIN. Getting an EIN is compulsory if you’re:
- A sole proprietorship/LLC with employees
- A partnership/corporation, with/without employees
What can I do with an EIN?
With an EIN you can do so much:
- Hire employees
- Open a business bank account
- Apply for a business loan
- Obtain a business permit/license
- Maintain your corporate veil
An EIN is more helpful for your business, and is completely free to get. Though there are other alternatives, an EIN remains the best TIN – you can just do so much with it. TRUiC has a lot of information if you need an EIN, on EINs in general. Visit their site for more.