Most times people confuse Tax Identification Number, Employer Identification Number, and ITIN, and most times they actually wonder, what’s actually the difference between the three. As a business owner, you actually need to know the difference between the three so that you can actually give the correct one when the occasion demands.
What is the Difference Between a Tax ID, Employer ID, and an ITIN?
Here let’s put your long search to rest as we explore each of the terms above to give you a better understanding.
Taxpayer Identification Number
This is a generic term used by the Internal Revenue Service to designate the types of numbers that it approves to be used for tax and identification purposes.
Tax ID numbers are basically used to track payments to individuals for federal income tax as well as other tax purposes, even though they have also become useful for a variety of identification purposes.
Types of ID Numbers
- Individual Taxpayer ID Number (ITIN)
- Social Security Number (SSN)
- Employer ID Number (EIN)
Apart from the above three numbers offered, the IRS also has two other special taxpayer ID Numbers, they are, the ATIN for pending adoptions and the PTIN for tax preparers.
Let’s start with the Individual Taxpayer ID Number (ITIN)
Individual Taxpayer ID Number (ITIN)
An ITIN is designed for people who are not eligible to get a Social Security Number or Employer ID Number. An employer can get ITIN from an individual for tax purposes.
ITINs are issued to people by IRS when the need for a tax identification number to process tax returns and payments arises.
Who is Likely to Get an ITIN?
- Dependent on the spouse of a U.S. citizen/resident alien.
- S. resident alien that is filing a U.S. tax return and not eligible for an SSN.
- Dependent on the spouse of a non-resident alien visa holder.
- Non-resident alien filing a U.S. tax return and not eligible for an SSN.
What is ITIN Used For?
It is used for tax reporting purposes only: note, the number cannot be used for identification purposes.
ITIN is Not to be Used For
- For someone eligible for social security benefits.
- For authorizing someone to work in the U.S.
- To qualify a dependent for an Earned Income Tax Credit.
Social Security Number
This is the most common Identifier for personal Identification and tax purposes. A Social Security Number is essential for individuals if they intend to get a job or collect Social Security benefits.
Uses of the Social Security Number
- Social Security Numbers are used by employers to report the annual income of employees for their income tax returns.
- It is also used to determine Social Security and Medicare eligibility and benefit payments.
- SSN is also used to identify workers for work eligibility via the U.S. Customs and Immigration system.
- It can also be used to open a bank account.
- It can be used to apply for a passport.
- Used on a federal student loan application.
- Applicants can use SSN for Medicare and Social Security benefits
- To check credit
- It can also be used to apply for public assistance, including unemployment benefits.
Employer ID Numbers
Employer ID Numbers (EIN) is a federal tax identification number for businesses, even though it is known as an Identifier for “employers”.
What is Employer ID Number Used For?
- It is used by localities as an Identifier for business licenses and permits.
- Used by banks as a requirement for opening a business bank account.
- Used for reporting and paying federal payroll taxes (federal income tax and FICA (Social Security/Medicare) taxes.
- Comes in handy for business loan application.
How to Get a Tax ID Number
Social Security Number
You can get the Social Security Number, by using the Social Security Administration page on Social Security Numbers and Cards.
ITIN
For an Individual Taxpayer ID Number (ITIN), you can get one by completing IRS Form W-7 and mailing it to the IRS, or you can apply in person.
EIN
To get an Employer ID Number (EIN), you can use an online method to acquire one.
