Tax Identification numbers (TINs) are pieces of information issued to businesses and people by the Internal Revenue Service (IRS). Employer Identification numbers are issued to businesses only.
Therefore, an EIN is a type of tax identification number, but it does not necessarily make them the same thing. In this guide, we will take you through everything you need to know about EINs and TINs to make sure you don’t get them confused the next time you have to file a tax return for yourself or your business.
Introduction
Understanding the difference between various tax numbers is important when you are filing your tax returns and other reports with the IRS. With so many terminologies and acronyms, this can be confusing. One of the questions you may have found yourself asking is, “Is EIN the same as Tax ID?”. The short answer is no. An EIN is, instead, a type of Tax ID. There are, however, some instances where a Tax ID refers to your EIN. In the post below, we’ll understand everything you need to know about EINs and Tax IDs. So let’s delve into the world of EINs and Tax IDs right away.
Understanding Tax ID Numbers
All types of Tax ID numbers help the IRS to determine whether or not you are paying taxes as an individual or as a business. They also help to establish how much tax you owe the IRS and whether or not you are eligible for things like tax breaks and rebates.
What is a Tax ID?
In the capacity of businesses, a Tax ID Number, also known as a TIN, is a number given to businesses. These numbers classify businesses and their operations and tax statuses for the IRS to keep tabs on what they owe and their returns filing history. Businesses can obtain a TIN from the IRS.
Applying for a tax ID
As a business, you will be able to apply for a TIN through the IRS. During the application process, you must specify the type of TIN you intend to apply for. However, businesses applying for an EIN can only do so through the IRS. This is the key difference between a TIN and an EIN.
There are different forms you will have to fill out when applying for the various types of TINs. The below section will specify these forms to make it easier to understand the procedures you have to follow when applying.
Types of Tax IDs
Different tax numbers classify you and your business differently based on the capacity in which you need to pay tax or create an identity. For example, a social security number tells the IRS that you pay taxes as an individual and that you are a citizen or permanent resident in the USA. Let’s break down the different types of TINs you can acquire and what they mean for you.
- Social Security Number (SSN) – this type of TIN gives you the right to citizenship in the US and classifies you as an individual taxpayer. To apply for an SSN, you must fill out and submit an SS-5 form which will give you your SSN once processed.
- Individual Taxpayer Identification Number (ITIN) – this is a number issued to individuals that are considered to be non-residents or residents as well as their spouses and dependents. An ITIN is also issued to anyone ineligible to be assigned an SSN. To get an ITIN, you must complete and submit a W-7 form.
- Employer Identification Number (EIN) – this is the most important number for businesses that are responsible for the employment of others. This type of TIN is also often referred to as a Federal Tax Identification Number (FTID) and is issued by the IRS to businesses with specific criteria. Anyone applying for an EIN must fill out an SS-4 form.
- Adoption Taxpayer Identification Number (ATIN) – ATIN is a temporary nine-digit number issued by the IRS to individuals who are in the process of legally adopting a U.S. citizen or resident child but who cannot get an SSN for that child in time to file their tax return. The IRS requires parents to complete a W-7A form to obtain this type of TIN.
- Preparer Tax Identification Number (PTIN) – If you have a job that requires you to submit tax returns to the IRS on behalf of other taxpayers, you will need a PTIN which can be obtained by completing a W-12 form.
- State-Issued Tax ID Numbers – if you are opening a business in a state that requires you to pay state taxes, they will issue you with a State-Issued TIN (although this varies from state-to-state) after you register your business there.
Exploring EIN – The Employer Identification Number
An EIN consists of 9 digits and is issued to businesses from the IRS. It helps the IRS identify your company and keeps tabs on taxes you must pay and any rebates you may be eligible for.
Definition of EIN
An EIN is an Employer Identification Number and can be defined as a number used by the IRS to identify a business, their activities and their tax status.
Who Needs an EIN?
It is mandatory for anyone who runs a business that has employees to have an EIN. However, anyone who wants to open a business bank account or apply for the use of business banking products and services will need to have an EIN.
Is an EIN the Same as a Tax ID?
An EIN is a type of Tax ID. The key difference between a Tax ID and an EIN is that an EIN can only be obtained through the IRS. However, a Tax ID can also be obtained through social security services. Another difference is that EINs are used to identify businesses. However, TINs can also be used to identify individual taxpayers too. There are some cases where you will be asked to fill in your TIN, and your EIN will suffice. This is usually applied when filing a tax return for your business. In other instances of filing individual tax, separate from your business, other types of TIN will be required.
EIN vs TIN: The Role of EIN and Tax ID in Business Operations
Both EINs and TINs play a crucial role in overall business operations, given that they act as identifiers for legal and tax affairs. You will need to have these numbers on hand when you run a business, as they will assist you in keeping up to date with your finances and the requirements of the IRS.
For Tax Purposes
An EIN and a TIN allow the IRS to keep track of your tax returns. This is why these numbers are vital and why returns require you to quote these numbers on any paperwork to submit to the IRS.
For Business Identification
These numbers also allow the IRS to identify your business, the nature of your company, and business operations. Understanding your company’s income and financial status provides information on the amount of tax businesses owe and whether or not they are eligible for a tax refund.
Frequently Asked Questions
What is the difference between an EIN and a TIN?
An EIN is issued to businesses by the IRS to keep track of their tax status. An EIN is, therefore, a type of TIN but is not the same thing. TINs can also be used to identify individual taxpayers and other entities too.
Does my business need an EIN?
If you have a business that employs people, it is legally required for you to have an EIN. Businesses that operate under a corporation, LLC, or limited partnership are also required to have EIN.
If asked for my TIN, can I give my EIN?
This depends on the context in which you are being asked for your TIN. If you are filling out paperwork that pertains to your company’s tax returns or reports, then it is acceptable to provide your EIN. However, if you are submitting a return for individual tax purposes, then you cannot provide your EIN.
EIN vs TIN: Conclusion
You should now have a better understanding of the difference between an EIN and a TIN. Although there are some cases in which a TIN refers to a business’s EIN, they should not be considered to be the same thing. An EIN refers to businesses exclusively and, therefore, should not be used interchangeably with other TINs like SSNs or ITINs. If you run a business that employs others, you must apply for an EIN through the IRS website, mail, fax, or telephone. You should also check whether or not your state requires you to obtain further, specific tax information.