In the United States, various identification numbers are used to track individuals, businesses, and tax obligations. Among the most commonly known are the Social Security Number (SSN), Employer Identification Number (EIN), and Individual Taxpayer Identification Number (ITIN). While these numbers may seem similar at first glance, each serves a distinct purpose and is issued to different groups of people or organizations. Understanding the differences between these numbers is essential for navigating the U.S. tax system and fulfilling legal and financial obligations. In this blog, we will break down what each number is, when and why you would need them, and how to obtain them.
What is an SSN (Social Security Number)?
A Social Security Number (SSN) is a nine-digit number given to U.S. citizens, permanent residents, and some non-citizens. It was originally created to track earnings for Social Security benefits, but now it’s used for many things, such as:
Social Security Benefits: To track earnings and determine eligibility for retirement, disability, and survivor benefits.
Taxes: To report income and file taxes with the IRS.
Employment: Employers use it to report your wages and pay into Social Security and Medicare.
Banking: You need it to open a bank account, apply for credit, or get loans.
Government Services: It’s used for things like unemployment benefits, health care, and student loans.
How to Get an SSN: U.S. citizens are given an SSN at birth. If you’re a non-citizen or a foreigner living in the U.S., you must apply for one using Form SS-5 (Application for a Social Security Card) and provide proof of identity.
What is an EIN (Employer Identification Number)?
An Employer Identification Number (EIN), also known as a Federal Tax ID, is a nine-digit number issued by the IRS to businesses and other organizations. It’s used to identify them for tax purposes.
When Do You Need an EIN? Businesses need an EIN if:
• They have employees.
• They are a corporation, partnership, or another type of business entity.
• They need to file special tax returns, such as for employees or excise taxes.
• They need to withhold taxes for foreign workers or entities.
Even small business owners without employees might get an EIN to keep their personal and business finances separate and to avoid using their SSN on business forms.
How to Get an EIN: You can apply online through the IRS website and get your EIN right away. You can also apply by submitting Form SS-4 (Application for Employer Identification Number) via mail or fax, and it will take a few weeks to process.
What is an ITIN (Individual Taxpayer Identification Number)?
An Individual Taxpayer Identification Number (ITIN) is a nine-digit number issued by the IRS to people who need to file taxes but aren’t eligible for an SSN. It’s mainly for non-resident aliens, foreign nationals, and others who have tax obligations but don’t have or can’t get an SSN.
Why Would You Need an ITIN?
• Filing Taxes: Foreigners or non-resident aliens who need to file a U.S. tax return.
• Income Reporting: Non-residents earning income in the U.S. need an ITIN to report their earnings.
• Tax Benefits: Some people with an ITIN can qualify for tax credits, like the Child Tax Credit.
• Financial Accounts: It may be used to open certain types of financial accounts, though this is less common.
Important: An ITIN does not allow you to work in the U.S. or receive Social Security benefits. It’s only for tax purposes.
How to Get an ITIN: To apply for an ITIN, you must submit Form W-7 (Application for IRS Individual Taxpayer Identification Number), along with the required documentation.
Knowing which number you need and the correct form to use will help you navigate the tax and financial system in the U.S. For expert assistance, connect with us and partner with our accounting services to ensure smooth financial management. Visit our website today!