Tax identification numbers (TIN) are crucial for tax purposes and are issued by the Internal Revenue Service (IRS). Understanding the different types of TINs is essential for compliance with tax regulations. There are primarily three different TINs:
- Social Security Number (SSN)
- Individual Taxpayer Identification Number (ITIN)
- Employer Identification Number (EIN)
TINs typically have a structure of 9 digits and are free to apply for.
What is an EIN?
An EIN, also known as a federal tax identification number, is issued to business entities, functioning like an SSN for businesses. Entities such as corporations, partnerships, and non-profits, as well as some sole proprietors, require an EIN for tax filing and other business-related activities like opening a bank account or hiring employees.
Who Needs an EIN?
Businesses that operate within the United States and are considered separate entities must obtain an EIN. This number is used for various purposes, such as hiring employees, applying for business loans, and registering a business entity.
How to Apply for an EIN
To apply for an EIN, businesses can complete the IRS Form SS-4 and submit it to the IRS. It is possible to get an EIN immediately by applying online.
A tax ID is a broad term that can refer to any type of number used for identification by the IRS. A Social Security Number (SSN) is a form of tax ID issued to individuals. On the other hand, an EIN is a specific type of tax ID given to business entities. While an EIN is a subset of TINs, it specifically caters to businesses, differentiating them from individuals for tax purposes.
In summary, an EIN is a type of TIN but is used exclusively for businesses, while an SSN is used for individuals. Applying for the correct type of identification number is crucial for proper tax administration and compliance.