Is an EIN the Same as a Tax ID Number?
As you prepare to file your taxes in advance of the April 15 deadline, you may be wondering about certain terminology. For instance, the 1040 form that most people use to file their federal income taxes may request your taxpayer identification number or Social Security number.
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Similarly, if you’ve recently been onboarded with a new job or started a side gig, you may have been asked to provide a tax ID number or Social Security number. Providing this information enables you to get paid and allows your employer to report those payments as W-2 or 1099 income.
A business, on the other hand, requires an employer identification number to file business taxes.
EIN vs. TIN: What’s the Difference?
An EIN is a tax ID number for businesses, churches, nonprofits and some other organizations. An EIN is a form of tax ID number, but not all tax ID numbers are EINs.
What Is a TIN?
A TIN, or taxpayer identification number, is the number that the Internal Revenue Service uses to identify taxpayers, including businesses, individuals and tax preparers. Once you receive your tax ID number, you’ll use it on any correspondence with the IRS, including when you file your tax returns.
There are different types of tax ID numbers for various taxpayers, including those who were born in the U.S. or are U.S. citizens, those who reside and work in the U.S. and are not citizens, and children who are awaiting adoption in the U.S.
Tax preparers have a second tax ID number, a preparer taxpayer identification number, which these professionals use to legally prepare and file tax returns for other people and businesses.
All tax ID numbers have nine digits, although an EIN follows the format of two numbers followed by seven numbers (XX-XXXXXXX), while other TINs have three digits, two digits, then four digits (XXX-XX-XXXX).
Is a Social Security Number the Same as a Tax ID Number?
A Social Security number is one form of tax ID number. However, unlike other TINs, it is granted by the Social Security Administration, not the IRS.
Most U.S. citizens apply for a Social Security number before they start working, apply for college or apply for a credit card.
Often, parents file for their child’s Social Security number shortly after birth. That’s because you and your child will need that number if you want to do any of the following:
Open a bank account for your child
Purchase a savings bond in their name
Add your child to your health insurance plan
Claim your child as a dependent on your taxes
Apply for government services for your child
Similarly, an adoption taxpayer identification number allows adopting parents to claim the child as a dependent on their tax returns, and possibly claim adoption tax credits as a tax write-off, even before the child has a Social Security number.
Who Needs a TIN?
Anyone who works or files taxes in the U.S. needs a TIN, even if they don’t qualify for a Social Security number. If you don’t qualify for a Social Security number because you are a nonresident or resident alien, but work in the U.S., earn income and have to file taxes, you can apply for an individual taxpayer identification number.
You can apply for an ITIN through Form W-7, Application for IRS Individual Taxpayer Identification Number. You can apply by mail, in person at an IRS office, or through an acceptance agent authorized by the IRS to process such paperwork.
What Is an EIN?
An EIN, or employer ID number, identifies a business entity, such as an S corporation, a C corporation or a partnership. The EIN is a form of federal tax ID number; the IRS uses it to recognize your business. A business includes its EIN on its federal tax filings the way an individual uses a Social Security number or tax ID number.
Who Needs an EIN?
According to the IRS website, you need an EIN for tax filings in any of the following situations, including if you:
Have any employees
Own a corporation or partnership
File tax returns for excise or employment, including Social Security and Medicare tax
Withhold taxes on income, other than wages, paid to a nonresident alien
Have a tax-deferred pension plan and are self-employed (sometimes, but rarely, referred to as a Keogh plan)
Additionally, if you work with certain types of organizations, including certain types of trusts, real estate mortgage investment conduits, estates, nonprofits, farmers’ cooperatives, or plan administrators, you need an EIN.
How To Apply for an EIN
Before you apply for an EIN, there are a few things you should know:
Obtaining an EIN is free; avoid organizations that try to charge for the application.
The IRS will only grant one EIN per person (responsible party), per day.
You can apply for an EIN online, which is the fastest and easiest way. Fill out Form SS-4, Application for Employer Identification Number.
You’ll need your name, the name of the business entity or individual applying for the EIN, mailing address, the trade name of the business (if it’s different from the applicant), and your Social Security Number or tax ID number.
You’ll also need to know the type of entity, the principal activity or industry the business is in, its primary offerings (such as types of merchandise, construction work, or services), and the county and state where the business is located.
You can receive your EIN in minutes once your information is validated during an online session.
Alternatively, you can fax or mail Form SS-4 to the same place you file your taxes, which you can find on the IRS website.
Bottom Line
You’ll need the appropriate type of TIN to file taxes or receive your tax refund as a business or an individual. If you have income from investments – even if you don’t report any earned income – you’ll need a TIN to report any capital gains tax.
Likewise, if you want to claim a child as a dependent on your taxes, your child will need their own tax ID number. Child tax credits are deducted from your bottom line tax bill; they don’t change your IRS tax bracket or your marginal tax rate. However, they can lead to substantial savings or even a tax refund.
This article originally appeared on GOBankingRates.com: Is an EIN the Same as a Tax ID Number?
