What is the Difference Between a Tax ID, Employer ID, and ITIN?

Tax ID, Employer ID, or ITIN?

Tax Identification Numbers
Tax Identification Numbers. Credit: Hitoshi Nishimura/Getty Images

You're filling out a form and you are asked for your "identification." Sometimes you may be asked for specific identification, but if you aren't sure of the difference, it can be tricky. 

Businesses also need to know the different kinds of identification they can accept for different purposes. 

What is the Difference Between a Tax ID, Employer ID, and ITIN?

A Taxpayer Identification Number is a generic term used by the Internal Revenue Service to designate the types of numbers which it allows to be used for tax purposes.

The possibilities for types of Taxpayer ID numbers include:

What is an Individual Taxpayer ID Number (ITIN)?

An Individual Taxpayer Identification Number (or ITIN) is nine-digit number issued by the IRS to individuals who must have an identifying number but who are not eligible for a Social Security Number or an Employer ID Number. ITIN's cannot be used for identification purposes. You must get a Social Security number from new employees to be used on Form W-4. An ITIN cannot be used to authorize work in the U.S. or provide eligibility for Social Security or other benefits.

Examples of individuals who might need an ITIN

  • Non-resident alien filing a U.S. tax return and not eligible for a SSN
  • U.S. resident alien (based on days present in the United States) filing a U.S. tax return and not eligible for a SSN
  • Dependent or spouse of a U.S. citizen/resident alien
  • Dependent or spouse of a non-resident alien visa holder.

What Taxpayer ID Does a Sole Proprietor Business Use?

A sole proprietorship commonly uses the owner's Social Security number for the tax number for the business. Since the business files and pays taxes through the owner's personal tax return, the SSN is the only Taxpayer ID Number needed.

What Taxpayer ID Does an LLC, Partnership, or Corporation Use? 

Businesses that are registered with the IRS typically use an Employer ID number for business identity. An Employer ID number (EIN) is used by all other types of businesses, even if the business has no employees. Banks often require a new business to have an EIN before they can open a business bank account. You can apply for an EIN online at the IRS website.

A single-member LLC is an exception. If you are the sole owner of an LLC, you should use your Social Security Number, not the tax ID number (EIN) of the business. 

What Taxpayer ID Do Individuals Use?

Most individual taxpayers have a Social Security number to use for tax purposes. But some individuals do not have the SSN; these individuals use an ITIN, or Individual Taxpayer ID Number. This number is for individuals, not businesses, and it is used for tax processing purposes for those who are not eligible for Social Security numbers. An ITIN is used by foreign nationals or immigrants or their spouses. It cannot be used to verify eligibility for work or for Social Security benefits.

Note: An an employer, you can accept an ITIN from an individual for tax purposes (for filling out a W-4 at hire, for example), but the IRS says an ITIN is not to be used for identification purposes or for benefits, like Social Security.

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