What is Tax Identification Number (TIN)

A Tax Identification Number (TIN) is a unique nine-digit identifier assigned to individuals, businesses, and other entities for tax-related purposes in the United States and many other countries. In the US, TINs serve as a critical component of the federal tax system, functioning as Federal Taxpayer Identification numbers to track tax obligations and payments.

TINs are essential not only for filing annual tax returns but also for a variety of tax-related activities.

Uses of TINs:

• Fundamental for filing annual tax returns
• Necessary for tax-related activities such as claiming tax benefits and processing employment taxes
• Used for reporting income from various sources, including investments and employment.

Beyond tax filings:

• Utilized by banks and financial institutions for IRS compliance
• Facilitates financial tasks like opening accounts and establishing credit.
• Required for identity verification in various financial transactions.

Types of TINs

The US government provides several types of identification numbers, all of which contain precisely nine digits. The US issues three primary types of TINs:

• A Social Security number (SSN)

• An Individual Taxpayer Identification Number (ITIN)

• An Employer Identification Number (EIN), also known as a FEIN (Federal Employer Identification Number)

Less commonly used identification numbers are the Adoption taxpayer identification number (ATIN) and the Preparer tax identification number (PTIN)

What is the Social Security Number (SSN)?

Social Security Numbers are the most common type of TIN. The SSN is a nine-digit number in a XXX-XX-XXXX format. It’s used by American citizens, permanent residents, and temporary noncitizen residents with authorization to work in the US. You must obtain a SSN to work within the US.

SSNs are issued by the Social Security Administration (SSA), not by the Internal Revenue Service. To get a new SSN, you must apply in-person at a SSA field office.

What is the Individual Taxpayer Identification Number (ITIN)?

Individual Taxpayer Identification Numbers are personal identifiers for non-US residents (foreign aliens). The ITIN is a tax processing number used by the IRS to aliens who may or may not have the right to work in the US, such as aliens on temporary visas and non-resident aliens. Often people who aren’t US citizens need this identification number to open a US bank account.

How to get an Individual taxpayer Identification Number (ITIN)

The ITIN is issued to people who are required to have a U.S. taxpayer identification number but aren't eligible to obtain a SSN.

To apply for an ITIN, complete IRS Form W-7, "Application for IRS Individual Taxpayer Identification Number". You’ll need to attach your federal income tax return and supporting documentation such as a copy of your passport. If your spouse or dependent do not have SSNs, they should also obtain ITINs so you can properly claim them on your tax return.

Since obtaining ITINs isn’t always easy, the IRS has approved the use of acceptance agents to facilitate the process. They are usually colleges, financial institutions, or accounting firms.

What is the Employer Identification Number (EIN)?

EINs, also known as Federal Employer Identification Numbers, are used by employers, sole proprietors, small businesses, corporations, LLCs, partnerships, non-profit associations, trusts, estates of decedents, government agencies, self-employed individuals, and other business entities.

You can obtain an EIN by submitting Form SS-4, Application for Employer Identification Number (EIN).

SSN vs EIN

Businesses and corporations need to have their own EIN. The situation is a little different with sole proprietors. In the case where they are the only employee, they are allowed to use their SSNs. However, as soon as they hire at least one individual, they are required to apply for an EIN.

Unlike SSNs, EINs are issued by the IRS. You get a new EIN whenever the business structure or business owner changes.

US Tax Identification Numbers for non-US citizens

In general, if you don’t need to file a tax return with the IRS, you don’t need to obtain a US tax ID.

However, foreign citizens might interact with the US tax system in several ways that will require you to file a US tax return. You might own a business that makes sales in the US, earn income from property owned in the US, earn returns from investments held in the US, or stay in the US over a number of days in a tax year.

If a foreign citizen is required to file a US tax return with the IRS, they’ll need to obtain a tax ID. Depending on the circumstances, you may either need to obtain SSN or an ITIN. Some countries have agreements with the US to exchange tax information, allowing you to use your home country tax ID instead of having to apply for a US tax ID.

Other US TINs: PTIN and ATIN

PTIN - Preparer Tax Identification Number

Since filing for taxes can be challenging, it is fairly common to ask for help from a third party. Since 2011, these tax preparation agencies must be authorized by the IRS by obtaining a PTIN. The preparer includes their PTIN on any tax return or claim for refund they help prepare.

PTINs are issued by the IRS. Foreign tax preparers without a Social Security Number have additional rules to follow.

Adoption Taxpayer Identification Number

The IRS assigns an ATIN to every child in the process of being adopted. It can last only up to two years. After that, the child must have their own SSN.

Requirements vary depending on individual circumstances. Consult with a tax professional to determine if you are required to file a tax return in the US, if you need to obtain a US tax ID, and how to properly do so.