What are the Differences Between the SSN, ITIN and EIN?

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Sometimes the wording used to explain tax documents, rules, regulations, and processes can be fantastically confusing. Fortunately, breaking down each type of number can help business owners understand which ones are best for their unique scenario.  

If you’ve been wondering about how ITIN, SSN and EIN tax ID numbers differ, then you’ve arrived at the right place. It can help to concentrate these identification numbers and see how they’re different and how they’re alike. This way, you can form a more comprehensive understanding of these tax terms and functions.

Here, we’ll take a look at the differences between an ITIN, SSN, and EIN for tax purposes.

What is an EIN (Employer Identification Number) 

An EIN is short for Employer Identification Number and is a unique identification number provided by the Internal Revenue Service for businesses. It is only provided upon request, and not everyone needs one. 

Who Needs an EIN? 

There are quite a few people who may need an EIN. Sole proprietors of small businesses don’t necessarily need an Employer Identification Number, but it could be helpful in the future. After all, owners cannot hire or pay employees if they do not have an EIN.

Generally, you’ll need to apply for and receive an Employer Identification Number if you:

  • Have employees
  • Are thinking of hiring employees
  • Need to file specific types of returns (including an employment tax return)
  • If your business operates as a general partnership or corporation and some cases a Limited Liability Company

Of course, this is not an exhaustive list, but covers the most common reasons for needing an EIN.  Note that even though a sole proprietor may not need to get one, many will as their social security number will be used to identify their business and many will rather use an EIN for privacy reasons.

Is an EIN Needed to Start a Sole Proprietorship or LLC?

An Employer Identification Number is not needed to start a sole proprietorship or a single-member LLC, provided there are no employees. However, in either scenario, you will need an EIN if you decide to hire employees. 

In these scenarios, the owner’s SSN is used as the tax ID number for the business.

Related: How to apply for an EIN without a SSN

How to Get an EIN 

Getting an Employer Identification Number is a relatively straightforward process. You could choose to apply online, mail, fax, or phone. Filing online is the fastest and is processed immediately. Mail, phone, and fax applications may take up to five weeks to process. 

Related: How to Apply for an EIN

What is an Individual Taxpayer ID Number (ITIN)? 

An ITIN, or Individual Taxpayer Identification Number, is a taxpayer number issued by the IRS to foreign nationals, nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN).

Basically, the ITIN is like a SSN, but it is only for people who are not permanent legal residents of the United States. The ITIN differs slightly in appearance from a SSN, as while it is a unique nine-digit number, it begins with the number 9. The SSN is issued by the Social Security Administration to US citizens at birth, while the ITIN is issued by the IRS. 

An Individual Taxpayer ID Number does not grant an individual the right to work, but it does allow them to file taxes. 

How to Apply for an ITIN

To apply for an ITIN, IRS Form W-7, Application for IRS Individual Taxpayer Identification Number (ITIN), will need to be filed. 

This application will also require your federal income tax return and original documentation or certified copies from the issuing agency to prove identity and foreign status.

The form can be sent to the IRS, apply in-person at an IRS-authoirzed Certifying Accptance Agent (typically financial institutions, accounting firms, colleges, etc) or IRS Taxpayer Assistance Center. 

Is an ITIN Required to Open a Business? 

Just like a social security number can be used to start certain business entities like the sole proprietorship or single-member LLC, provided there are no employees, the ITIN can be used the same way.  The ITIN will allow you to file taxes at the end of the year and open a business bank account. 

Even if you don’t have an SSN or ITIN, you can still get an EIN for your business.  Despite what many people may tell you, you don’t have to be a U.S. citizen to get an EIN. 

Having an SSN or ITIN will let you file for an EIN online and get it more quickly, but again isn’t required. The required mail in form is IRS Form SS-4 – https://www.irs.gov/pub/irs-pdf/fss4.pdf

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