Things to Know About Tax Identification Numbers

Jun 6, 2021

The IRS has specific requirements when dealing with tax returns for both individuals and businesses and among them are the individual taxpayer identification numbers (TINs). The Individual Taxpayer Identification Numbers are issued either by the Social Security Administration (SSA) or by the IRS. The SSA issues Social Security Numbers (SSNs) for eligible taxpayers (mostly those authorized to work in the US) while ITINs are issued by the IRS. In this article, we will cover everything you need to know about tax identification numbers and how to get one. 

What is a TIN and why should you have it?

The TIN  stands for a tax identification number and it is the string of numbers the IRS uses to identify you. You will need this number to file your taxes, open a business bank account or apply for a loan from any bank.

Applying for ITN

Types of TINs

      • Social Security Number, SSN

The SSN is the most common tax I.D. number. The Social Security Administration issues these numbers to U.S. citizens, permanent residents, and specific temporary residents.

You will need a Social Security Number to secure your legal employment status, get social benefits, and access other government services within the United States.

All children need SSNs before their parents can register them as dependents for tax income purposes, meaning that parents can voluntarily apply for an SSN on behalf of their child. A child with an Individual Tax Identification Number is already dependent; you won’t need an SSN, although special rules apply to ITIN dependents in order to claim the child tax credit (and additional child tax credit)

Applicants need to complete Form SS-5 to get the Social Security Card. One must clearly state their identity, age, citizenship, or lawful alien status in the application. The Social Security Administration offers these services free of charge. Applicants can check this page to find the Social Security office that has jurisdiction over their area.

It is important to note that disclosing your SSN puts you at risk; only release it when necessary, as required by law, to the IRS, employer, and lenders.

You might also like: Filing U.S. Expat Tax Return if you are American Overseas

      • Individual Taxpayer Identification Number (ITIN)

An ITIN (Individual Taxpayer Identification Number) is a nine-digit Tax Identification Number held by nonresidents and aliens, their dependents, and spouses ineligible for the Social Security Number. It has a different format as SSN (9XX-XX-XXXX) and begins with the number 9.

You need to complete Form W-7 and submit documents supporting your residents for you to get ITIN. Applicants can either present their application together with W-7 to the address indicated on the Form (W-7), present themselves in person to the IRS offices, or process their application through any IRS accepted Acceptance Agents. Acceptance agents include banks, accounting firms, and colleges authorized by the IRS to assist the public with their ITIN application.

You can always check with the Interactive Tax Assistant tool whether you should apply for ITIN or not.

      • Employer Identification Number, EIN

The IRS uses the Employer Identification Number, also called the Federal Tax Identification Number, to identify entities for tax purposes. Like SSN and ITIN, EIN is also a nine-digit number, except the alignment differs; it is XX-XXXXXXX instead of XXX-XX-XXXX in the other two.

Those eligible to apply For EIN must do so and use the number to report their respective income for taxation purposes. The application process is simple and entirely free of charge.

Related: Avoiding delays: A Guide to ITIN Renewal for Taxpayers

Tax ID vs. EIN has been a point of discussion for many. Please note that the main difference between these two is that the IRS uses the former to identify companies while EIN only identifies the taxable individuals. Otherwise, both are critical for reporting and identification purposes.

      • Adoption Tax Identification Number, ATIN

ATIN is a temporary, unique nine-digit number that the IRS issues to people in adopting a child or children. The IRS issues this number if the adopting parents cannot get a Social Security Number for the subject child in time.

Adoption Tax Identification Number only identifies the child, not the parents, and is a must-have for the parents to claim the child as their dependent legally.

Applicants must file IRS form W-7A and submit it together with a copy of the placement documentation to get the ATIN. Also, the adopting parents must have placed the child in their home for adoption at the time of application. Form W-7A, however, does not apply if the child is not a U.S. citizen or resident.

It takes between 4 and 8 weeks, from the time of submitting the Form W-TA, to get an ATIN, so it is important to apply well in time before your taxes are due. The IRS automatically deactivates ATINs after two years unless you notify them that the adoption is pending.

      • Preparer Tax Identification Number, PTIN

A Preparer Tax Identification Number is a mandatory requirement for any individual that prepares or aids in preparing federal tax returns for compensation. The IRS requires all tax preparers to attach their PTIN on clients’ tax returns.

A tax preparer can apply for their PTIN on the IRS online platform; the process only takes about 15 minutes. They can also opt to fill out form W-12 and mail it to the IRS offices. The second option is a bit longer and takes about four to six weeks.

Please note that volunteer preparers do not need to have identification numbers

Is Your Taxpayer ID Your Social Security Number?

Individual taxpayers would have their Social Security Numbers as their taxpayer I.D. unless they applied for EIN for their businesses. The IRS does not require all companies to register for tax identification numbers, but having one is always an excellent idea for most. 

Should I Use My SSN or EIN?

SSN can only replace EIN if someone is a sole proprietor or runs a Single Member LLC that, by law, is not required to file taxes independently from its owners. These businesses are run without employees. The SSN is to a person what an EIN is to a business; you must use EIN to keep tabs on your business tax filings. 


What Are The Benefits Of Having An EIN Number?

An EIN is not mandatory in all cases, but it has the following benefits. 

      • Helps Avoid Tax Penalties

EIN enables you to pay your business taxes and avoid tax penalties. The law might not compel you to have one, but you must do your research early enough and figure out if your business needs an EIN or not. If by Tax Day you do not have an EIN when you should have one, you must fill out a specific form to notify the IRS. If you fail to do this, the IRS may reject your returns and subject you to penalties.

Having an EIN also minimizes your chance of IRS tax audit in cases of specific deductions like home office deduction for businesses. 

      • Secures Your SSN

Having EIN prevents identity theft by separating your finances from your business finances. With this number, you won’t have to provide your SSN to vendors and clients anymore; it keeps your Social Security Number private, lowering the chances of being targeted by fraudsters. Please note, thieves target EINs as well, but it is not that widespread for now- You will still need to be careful and keep it safe. 

      • Speeds Up Business Loan Application Process

The EIN also speeds up your business loan application process. Most lenders will not explicitly demand an EIN when applying for a loan as long as you legally qualify. However, they may require you to have a business bank account with a specific number of deposits to ensure you have somewhere to receive your money and make periodic payments. Remember, you require an EIN to have a business account. 

Having an EIN also helps you build your business credit which enables you to acquire better loan facilities. 

What does a TIN look like?

The Tax Identification Numbers vary depending on the type of TIN. A Social Security Number contains nine digits arranged in the following format: XXX-XX-XXXX. The first three digits denote the geographical significance; the two do not have any fundamental importance and are always sequential, while the last four digits are always random. 

Similar to SSN, the EIN has nine digits with the following format: XX-XXXXXXX.

The ITIN is also a nine-digit number but in this format; 9XX-XX-XXXX. It must always begin with a number nine. 

How Do I Know What My TIN Is?

You can find your U.S. Taxpayer Identification number in various documents, including forms filed with the IRS and tax returns. In the case of SSN, the Social Security Administration Issues a social security card. TINs are and must remain confidential at all costs. They are protected by law from disclosure under section 6103 of the Code.

Written by

Kasia Strzelczyk, EA

A certified accountant and IRS enrolled agent with over 8 years of experience working with US expats. With a deep understanding of the unique financial challenges faced by expats, Kasia is dedicated to helping clients navigate complex tax laws and regulations.

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