How do you identify yourself? Probably by your name, appearance, and personality, right? Well, the US government identifies you and your business by something a bit less personal — a nine-digit number. This number is either an ITIN, EIN, or SSN.
Usually, businesses need to obtain an EIN and request ITINs and SSNs from their employees for compliance with tax laws. However, you need to know the differences between these three codes because there can be nuances in who uses which one.
What is an ITIN vs. EIN vs. SSN?
ITIN, EIN, and SSN are three different kinds of tax identification numbers issued by the Internal Revenue Service (IRS) and Social Security Administration (SSA). These numbers are mainly used for filing taxes, identifying people and business entities, and tracking financial information. We’ll go over in-depth what each of these numbers is for, who uses them, and how to get them.
|Who can get it?||Format||Who is it for?||Which form to file?||Who issues it?|
|ITIN (Individual Taxpayer Identification Number)||US residents and nonresidents who can't get an SSN||9XX-XX-XXXX||Individuals||W-7||IRS|
|Social Security Number (SSN)||US citizens, legal US residents, and lawful aliens||XXX-XX-XXXX||Individuals||SS-5||SSA|
|Employer Identification Number (EIN)||Businesses that operate in the US||XX-XXXXXXX||Businesses||SS-4||IRS|
An ITIN identifies taxpayers with foreign status
The Individual Taxpayer Identification Number (ITIN) designates US residents or nonresidents with foreign status for tax purposes. It always starts with a 9 and follows the same format as a Social Security number, i.e., 9XX-XX-XXXX.
An ITIN is for individuals — not businesses — who can’t get an SSN, but still need a taxpayer ID. The ITIN covers a wide range of people, regardless of legal immigration status, including:
- nonresident aliens and US residents with foreign status
- spouses and dependents of US citizens who are nonresident alien visa holders and don’t have permanent residency
- nonresident aliens who need to file US tax returns or claim tax treaty benefits or exceptions
A nonresident worker who’s ineligible to get an SSN would want to get an ITIN instead for tax purposes. Another common case in which someone might need an ITIN is if they’re a non-US resident who owes the IRS taxes based on US-sourced income. Say a foreign-owned business earns money in the United States. Its owners may still owe taxes to the IRS if they don’t qualify for tax treaty exemptions. In that case, those foreign nationals need an ITIN to use when filing taxes.
How to get an ITIN: File Form W-7 with your federal income tax return. You must include documents that demonstrate proof of identity and establish your foreign status, such as a passport, national identification card, and visa. You can then mail your documentation to the IRS or apply with it in person at an IRS-authorized Certifying Acceptance Agent. Alternatively, schedule an appointment at your local IRS Taxpayer Assistance Center for additional help.
An SSN identifies US citizens and permanent residents
The Social Security Number (SSN) is a number assigned to US citizens and permanent residents. It’s a randomized nine-digit number that follows the format XXX-XX-XXXX.
The SSN is available to all US citizens and people with lawful alien status. Temporary nonimmigrant workers with eligible visas — like foreign nationals visiting the US temporarily for study or business — can also apply for an SSN. Unlike an ITIN, an SSN is restricted to those with US citizenship or a specific immigration status. Check the Social Security Administration’s guidelines on which noncitizens are eligible to get an SSN.
The primary purpose of having an SSN is identification. However, it has many other uses, like granting people the right to work in the US and collect Social Security benefits. People can also use their SSN to file taxes, apply for loans, open personal bank accounts, register to vote, register their motor vehicles, and more.
How to get an SSN: Fill out Form SS-5 to apply for a Social Security Card. Gather all necessary documents to prove your citizenship or immigration status, eligibility to work, age, and identity. Visit your local Social Security office to submit the documentation.
A person can either have an ITIN or an SSN but never both at once. If someone has an ITIN and later gets an SSN, their ITIN is invalidated, and they should contact the IRS to combine their tax records under their SSN identity.
An EIN identifies businesses in the US
The Employer Identification Number (EIN) or Federal Employer Identification Number (FEIN) is a number that identifies a business that operates in the US. It’s also known as a Federal Tax ID Number. While it’s also a nine-digit number, its format (XX-XXXXXXX) differentiates it from that of an SSN or ITIN.
All business entities that operate in the US can obtain an EIN. This includes corporations, LLCs, partnerships, non-profits, estates, and trusts. An EIN is not legally required for sole proprietors and single-member LLCs if owners report business income and expenses on their personal tax returns.
Businesses can use an EIN to open a business bank account, apply for a business loan, handle payroll, and file taxes. Sole proprietors may want to use an EIN instead of their SSN to protect their privacy and keep their business and personal finances separate. Since circumstances vary from business to business, the IRS has a useful questionnaire to help you determine if your company needs an EIN.
How to get an EIN: If you have an SSN or ITIN, apply online. If not, mail or fax Form SS-4 to the IRS, referring to the IRS’ instructions on how to do so.
Which tax identification number should my business use?
Out of the ITIN, SSN, and EIN, which one you use depends on what you need your tax ID number for. But usually, you’ll work with at least two, if not all three numbers when conducting business.
Request an ITIN or SSN from your US-based workers for payroll
Your US-based workers should provide you with their ITIN or SSN so that you can pay them officially on your business’ payroll.
Request SSNs from those eligible, like US citizens, permanent residents, and legal aliens. Meanwhile, request ITINs from nonresidents.
Remember that an ITIN does notauthorize its holder to seek employment in the US and can’t be used for I-9 or W-2 paperwork. US-based employees must either have an SSN or be eligible to apply for one before hiring. An ITIN should only be requested from nonresident, US-based contractors who are eligible to receive a 1099-NEC form. This usually doesn’t apply to international, non-US-based contractors, but check with your contractors on a case-by-case basis.
Business owners should also have either an ITIN or SSN for filing their personal taxes.
Use EIN for your business’ tax filings and payroll
Use your EIN on all tax and payroll paperwork for your business. When filling out forms for your business, use its EIN wherever an individual would normally use an ITIN or SSN. For example, when applying for a business bank account or loan, you can apply with the business’ EIN instead of the business owner’s SSN or ITIN. This keeps your business finances separate from your personal ones, which is great for compliance. It also protects your SSN from potential security risks.
Separate your business and personal taxes
In most cases, businesses should file taxes separately from their business owner or owners — and that’s where having an EIN is important. Keep finances separate by filing taxes for the business under an EIN and for the individual business owner under their ITIN or SSN.
In some unique cases, though, you’ll need to file taxes for both yourself and your business on the same tax return. This often happens with sole proprietorships or single-member LLCs, where the business owner includes the business income and expenses on their personal tax return. Here, you would generally use just your ITIN or SSN instead of an EIN — but it’s best to check with legal counsel or a certified tax professional.
Every business is different
An SSN or ITIN identifies a person, while an EIN identifies a business. Sometimes, a business might be just one person — but it’s still best practice to keep those numbers separate. However, tax ID numbers aren’t one-number-fits-all, so it’s important to make sure you have the right numbers for your business uses.
Still unsure which numbers you need or don’t need? Pilot has a team of experts available to answer your tax compliance questions. Try us out today to find out how we can help you seamlessly hire and pay your employees wherever they live.
⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Cover photo of a person's hands signing a form courtesy of Leon Seibert on Unsplash