When you run a business in the USA, there are several tax numbers you have to keep track of. It can be easy to get confused with all the different terminologies, but once you understand the difference between the different tax identifiers, things become a lot easier. 

So is a taxpayer identification number the same as an SSN? The first thing to remember is that a Tax or Taxpayer Identification Number (TIN) is the term given to a group of different identification numbers. For this reason, a Social Security Number (SSN) is not the same as a TIN but is instead a type of TIN. 

In this guide, we’ll take you through the different kinds of TINs and help you understand the difference between them. This is especially important if you run a business in the United States and need to distinguish between your personal and business expenses.

What is a taxpayer ID number (TIN)?

A TIN is a term given to all the different types of tax numbers used by the IRS to ensure individuals and businesses pay the right amount of tax and the right type of tax. TINs must appear on all tax documents so that the IRS can keep track of the individual’s or business’s tax affairs. 

There are different types of TINs that individuals and businesses have to worry about. These are mainly their Social Security Numbers (SSN), Employer Identification Numbers (EIN), and Individual Tax Identification Numbers (ITIN). These are the most important to the IRS as they ensure that people file the correct tax returns within the correct parameters set out by the government. 

The purpose of a Taxpayer ID Number (TIN)

In the USA, anyone who is earning a taxable income has to pay tax to the IRS legally. This is the case whether they are an individual or operating in the capacity of a business. These TINs ensure that people correctly file their tax returns every tax year and to help ensure that no one is committing tax fraud or tax evasion. 

People also use their TINs to reduce taxes under certain circumstances. Sometimes, there may be less tax due to be paid by an individual or a business. For example, income from a pension has reduced tax rates compared to standard income from employment. This will also be the case if someone’s income changes and they enter into a new tax bracket. Either way, all this information will be attached to a TIN. Therefore it’s essential that everyone has one and keeps their information up to date to avoid paying more tax than necessary. 

What is an SSN?

An SSN is a Social Security Number. Everyone who pays tax as an individual, whether they are an income-earning citizen or someone earning taxable income as a temporary worker. An SSN is also issued to citizens and permanent residents in the USA, whether they are earning an income or not. 

An individual’s social security number holds all the information required by the IRS to determine how much tax one should pay and their income status in the USA. For those that are self-employed or operate under sole proprietorship, an SSN is necessary as it allows the Social Security Administration (SSA) to keep track of all the income brought in by an individual. 

SSNs allow the SSA to accurately record taxable income, which enables individuals to pay the right amount of tax. 

The purpose of an SSN

So why do most people in the USA have SSNs? The main reason is for accurate tax reporting. However, there are other reasons that social security numbers are important too. Many companies who are hiring people will ask for their SSNs to prove that they are US citizens.

In the event of hiring someone who is not a citizen of the USA, the company may have to sponsor a work visa for the individual, which is not something businesses take lightly. An SSN is, therefore, one of the pieces of information used to prove one’s identity. 

Another purpose served by an SSN is to show that you are eligible for certain government benefits and can use government services. Basically, your SSN can be used to file accurate tax returns, qualify for certain tax reductions, claim government benefits, and prove that you are a tax-paying resident in the United States. 

For filing tax, many businesses prefer to use their EINs as it helps them to keep personal and business expenses separate. However, if you run a business wherein you are self-employed and do not have any employees working under you, you can also use your SSN.

TIN vs. SSN – What’s the difference?

There are some key differences between a TIN and an SSN, mostly involving whether or not you are required to file taxes as an individual or as a business. Not only will the amount of tax you pay be different under the given circumstances, but you will also be able to claim different benefits depending on the number you need to use. 

They are issued from different places

Most importantly, one obtains an SSN and a TIN from two different places. A TIN is issued to individuals or businesses by the IRS. This is why one must apply for their TIN through the IRS instead of through the SSA. However, one’s SSN is issued to them by the SSA.

An SSN is a type of TIN

Although TINs usually refer to the different tax ID numbers associated with businesses, an SSN is a type of TIN. One’s SSN holds all the relevant information required by the SSA to determine how much tax an individual owes. It also keeps track of one’s income and any modifications or reductions to their tax that might be applicable. 

Individuals vs. Businesses 

TINs other than SSNs are usually used by those operating in the capacity of a corporation or a partnership. For example, an EIN is also a type of TIN, which is the tax ID number used to open business bank accounts, and file company tax returns. However, if you run a business and do not employ anyone, it is possible to use your SSN instead of your EIN. 

Can you use a TIN instead of an SSN?

If you run a business, there is every likelihood you have an EIN. It’s certainly worth looking up your EIN if you haven’t already, as it is very useful for keeping business and personal expenses separate. In this circumstance, it is possible to use the EIN type of TIN instead of your SSN. If you run a business that does not have any employees other than yourself, then it is possible to use your SSN to file tax returns.