Is an Employer ID Number the Same as a Tax ID Number?

Taxpayer Identification Number (TIN) is a term that applies to all of the nine digit numbers used by the IRS to identify various categories of taxpayers. An Employer Identification Number (EIN) falls under this umbrella. Tax ID numbers are issued by the Social Security Administration or by the IRS.

Social Security Number

Created in 1936, the Social Security number is the number that individual United States citizens or those who have legal alien status use to file their taxes. Originally developed to facilitate the administration of Social Security benefits, over the years, the number has also evolved to be a primary source of identification. The Social Security number allows government and business to track financial and other information for each individual. Almost every legal resident of the United States has a Social Security number.

Employer ID Number

An Employer ID Number (EIN) is the Taxpayer Identification Number used by corporations, partnerships, limited liability companies as well as some trusts and other types of organizations. Typically, individuals, who are sole proprietors, do not file a business tax return and can use their Social Security number in place of an EIN. However, some states require an EIN to issue licenses or to file state taxes.

Although an EIN is not mandatory for a sole proprietor, there are advantages having this designation. An EIN is needed if you plan to:

  • Employ others
  • Operate a sole proprietorship that you purchase from someone else or inherit
  • File for bankruptcy
  • Save money for retirement via a Keogh or 401K plan

Having an EIN may enhance your professional status. It demonstrates to clients and others that you are an independent businessperson. Using an EIN in place of your social security number could also provide some protection from identity theft.

If your business is located in the United States or its territories and you have a valid taxpayer ID, you are eligible to apply for an EIN. You can complete the forms here using GovDocFiling to guide you through the process.

Individual Taxpayer Identification Number

Another type of tax ID number is known as an individual taxpayer identification number or ITIN. As the name suggests, ITINs are reserved for individuals rather than taxpayers. They are designated for foreign nationals and immigrants who do not have a status that allows them to obtain a social security number. There are times where foreign nationals or immigrants might still need to file a tax return in the United States, even if they are not permanent residents or even authorized to work here. This might include someone who lives and works abroad but makes money in the U.S. and must file a tax return. However, most foreign businesses that conduct business in the U.S. and must file taxes will have an EIN rather than an ITIN.

Identifying Tax IDs

The IRS has made it easy to identify the different types of tax IDs, even though they are all nine digits long. Social security numbers are written as followed: XXX-XX-XXXX. ITIN have a similar format, but they always begin with the number nine and will have a number 70 to 99 in the middle section. EINs follow this format: XX-XXXXXXX. Someone well versed in tax ID numbers will know at a glance the type of ID.

Conclusion

In conclusion, an employer ID number is a type of tax ID number, but they are not exactly the same. You might find that the two are used interchangeably, but it is not entirely accurate to do so. Technically, social security numbers and ITIN are also tax ID numbers. If you want to designate that you are discussing the tax identification number required for businesses, then you should use the term EIN or employer identification number.  However, many people will recognize to what you are referring if you talk about a tax ID number rather than an EIN.

If your business is located in the United States or its territories and you have a valid taxpayer ID, you are eligible to apply for an EIN. You can complete the forms here using GovDocFiling to guide you through the process.