Is an EIN the same as a tax ID? The differences between these and the ITIN

First, we need to distinguish between generic names for tax ID numbers and specific types of tax IDs. “Taxpayer identification number” or “tax ID” refers to the general term used by the IRS and other government agencies to group several kinds of tax IDs that help establish the identity of taxable entities or individuals.

The most important of these numbers are:

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

This means that the EIN is one type of tax ID, but a tax ID is also any one of the other specific tax identification numbers mentioned above. And there are others, which we’ll cover one by one.

Understanding the Individual Taxpayer ID Number: ITIN vs. EIN

The Individual Taxpayer ID Number, or ITIN, is for people who don’t have a Social Security Number or an EIN. These numbers are issued by the IRS or by the Social Security Administration to resident and nonresident aliens or their dependents who need to be identified for legal employment and taxation.

Employers can then accept an ITIN from a new employee in lieu of an SSN or EIN. You as an employer can use this number for payroll tax documents such as the W-4, W-2 and W-3 summaries of payroll deductions.

The ITIN is not generally valid as an identification number in other contexts, and the IRS is quite specific that it can’t be used to give someone legal permission to work in the United States, receive an Earned Income Tax Credit or gain eligibility for Social Security benefits.

Dependents of ITIN holders may, however, qualify for Earned Income Tax Credits as of 2021 even if they lack a Social Security Number, but this comes with certain legal conditions.

So what kind of employee might lack an SSN but have an ITIN? They include the following:

• Nonresident aliens with legal work visas for the United States but no SSN eligibility
• Fully resident U.S. aliens who don’t yet have a Social Security Number
• Dependents and spouses of nonresident aliens with visas
• Spouses or dependents of U.S. citizens and resident aliens who themselves lack an SSN

How to request an ITIN

Resident and nonresident aliens in the United States or their dependents and spouses can request an Individual Tax Identification Number by completing IRS form W-7 and including supporting documentation that substantiates their migratory status and identity. These forms may be mailed to IRS acceptance agents, which can include colleges, financial organizations and other institutions with IRS authorization to receive ITIN applications.

The role of Social Security Numbers

Social Security Numbers are generally the most important and widely used individual tax and identity numbers in the United States. All U.S. citizens and lawful permanent residents need an SSN to file their tax returns, apply for Medicare or Medicaid, request pension benefits or deal with the U.S. Customs and Immigration system.

Social Security Numbers are also usually needed when opening a bank account, applying for passports, requesting public assistance, applying for federal, state or student loans and running credit checks.

Nonresident aliens and certain kinds of resident aliens and their spouses or dependents don’t normally qualify for Social Security Numbers. In these cases, they may be eligible for an ITIN as their tax ID for legal work in the United States.

How to request a Social Security Number

Citizens and legally eligible residents of the United States may request an SSN by filling out Form SS-5, Application for a Social Security Card and submitting it along with proof of their identity, age and citizenship or residency status to the Social Security Administration. The SSA maintains printable online copies of this form along with instructions on its website.

Understanding the Employer ID Number

The Employer ID Number, or EIN, is a federal tax ID specifically applied to business entities, not private individuals. Despite the use of the word “employer” in its name, a business doesn’t need to have employees to require an EIN.

Why and when does a business need an EIN?

The EIN is the key number the IRS uses to identify businesses in the United States for income tax and other tax purposes. This number also has several additional uses for businesses, such as:

• Applying for municipal, state and other licenses and permits
• Reporting and paying federal FICA taxes such as payroll, income tax, social security and Medicare
• Applying for business loans
• Opening bank accounts in the name of their business

Does your business need an Employer ID Number?

Not all legally designated business types need an EIN. For sole proprietorships, the owner’s Social Security Number is usually suitable for tax ID purposes for federal and state tax or opening small business bank accounts.

However, for single-member LLCs, even if they have no employees, an EIN will likely be necessary. If you’ve registered your company as an LLC or some other business entity, especially if you want to apply for business loans or open a business bank account, an EIN will probably be necessary.

How to request an EIN

You can apply for an EIN with the IRS free of charge via email, mail or fax through its website. Filling out your EIN application means giving the IRS your SSN, ITIN or EIN as the true owner of the business. The IRS then considers this person, whether it’s you or someone else, as the responsible party for that business. This responsible party has to be a person, not another business entity.

The IRS offers an internet EIN application section on its website for applying for the Employer ID Number.

Does your business also need a state tax ID number?

States also issue their own tax identification numbers, and the specifics and types may vary considerably by jurisdiction. These state tax ID numbers are often necessary if you’re earning income, forming a business, hiring employees or selling products and services in one or more states.

For more information about your state’s tax ID number for businesses or individuals, you should contact the tax authority relevant to where you live or do business.

Other special IRS tax ID numbers

Finally, it’s worth mentioning a couple of additional tax ID numbers the IRS uses for special circumstances. They are the ATIN and the PTIN.

The ATIN

This is also called the Adoption Taxpayer Identification Number, and the IRS uses it as a temporary ID code for individuals who are adopting a minor who is a U.S. citizen or resident but who lacks their own SSN. The ATIN is used until an SSN is processed for tax filings in which the child is registered as a dependent.

The PTIN

The Preparer Tax Identification Number is a special tax ID number issued to professional tax preparers and is required for anyone who is paid to prepare taxes. Individuals who prepare the tax forms of their dependents for free don’t need this number.