If you are an international entrepreneur or simply someone who needs to better understand the differences between SSN, ITIN, Tax ID and EIN, you are in the right place. There is no need to deal with the confusion and frustration that often come with the task of obtaining a tax identification number in the U.S.
This article will give you a clear and complete overview of each of these numbers, so you can make informed decisions and take the steps needed to enter the U.S. market. So, without further ado, let's dive into this essential topic for anyone who wants to succeed in business in the U.S.!
What is a Tax ID?
A Tax ID or Tax Identification Number is a nine-digit number issued by a U.S. tax agency and assigned to both individuals and legal entities.
Getting a tax ID is important, since this tax identification number must be included on all tax-related documents. The TIN or tax ID is also required when applying for credit or for a job.
All U.S. tax identification numbers are issued by the IRS, except for Social Security Numbers (SSN), which are issued by the Social Security Administration.
There are different types of Tax ID, the most notable being the SSN, the ITIN and the EIN.
What is an SSN?
An SSN is a nine-digit Social Security Number (xxx-xx-xxxx) issued by the Social Security Administration (SSA). U.S. citizens and authorized residents have an SSN. Non-U.S. residents are not able to obtain one.
Every individual who wants to work in the USA will need to obtain an SSN. This is because employers request it to report the employee's wages. Parents must also obtain an SSN for each child included on their tax return. Banks and credit companies may also ask for an SSN in order to provide you with services.
Anyone who meets the requirements for an SSN can apply for one by completing an application known as Form SS-5.
What is an ITIN?
The ITIN (Individual Taxpayer Identification Number) is a tax identification number issued by the IRS to individuals who do not qualify to apply for an SSN.
The ITIN will be required to file and pay certain federal taxes. As a result, foreign LLC owners or foreign shareholders of Corporations often need an ITIN.
To obtain an ITIN, you must complete IRS Form W-7. It is important to note that a person cannot apply for an ITIN and an SSN at the same time. For example, if an SSN application is pending, an ITIN will not be issued.
What is an EIN?
An EIN is a unique nine-digit number the IRS uses to identify businesses for tax purposes. The secretary of state issues EINs and uses them on state tax forms. The EIN is essentially a business's SSN.
Most businesses need one to carry out essential tasks such as opening a bank account, hiring employees, paying taxes or applying for business loans. Businesses that must have an EIN according to the IRS include:
- Corporations
- Partnerships
- Limited liability companies
- Nonprofit organizations
The IRS EIN application process is free and easy to complete. You can apply for an EIN on the IRS website, or you can contact us and we will take care of everything for you.
Conclusion
| SSN | ISIN | EIN | |
|---|---|---|---|
| Who is it for? | U.S. resident or citizen individuals | Individuals who cannot apply for an SSN | Businesses |
In conclusion, we can say that Tax IDs are essential for meeting tax obligations and doing business in the United States.
The SSN is the tax identification number issued to U.S. residents by the Social Security Administration, while the EIN is the equivalent for businesses. The ITIN, on the other hand, is the tax identification number that must be obtained by people who cannot apply for an SSN and who want to do business in the U.S. and comply with U.S. tax laws and agencies.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, founder of Start Companies and a specialist in U.S. companies for entrepreneurs, freelancers and digital businesses in Latin America. With training in international taxation and studies at UCEMA, he advises non-resident clients on forming and maintaining LLCs, opening bank accounts, invoicing, accounting and taxes. His experience combines tax strategy, compliance and practical vision for operating in the U.S. in a simple, organized and professional way.
