Knowing the differences between SSN, EIN, and ITIN is critical for starting a business and filing taxes. Whether you’re a seasoned small business owner or new to entrepreneurship, understanding these three tax identification numbers can save you time, money, and unneeded stress.
Tax identification numbers (TINs) identify a person or business on government documents and are essential for tax and compliance matters. As a business owner, you probably have more than one TIN.
You’ve likely already heard of Social Security numbers (SSNs), but Employer Identification Numbers (EINs) and Individual Taxpayer Identification Numbers (ITINs) may be less familiar to you.
So, which number should you use for filing taxes? Is one better than the others? In this article, we’ll cover these questions and more.
What is a Social Security Number?
Social Security numbers (SSNs) are the most common tax identification numbers used in the United States. Each nine-digit number (formatted XXX-XX-XXXX) is used by US citizens, permanent residents, and other authorized residents to get hired, get paid, and collect Social Security benefits starting at age 62.
What is a Social Security Number used for?
The United States government uses Social Security numbers to track an individual’s employment history and earnings, as well as to determine eligibility and payments for benefits like Social Security and Medicare.
SSN holders use this number to open bank accounts, apply for passports or driver’s licenses, and access services like federal student loans or public assistance.
Employers use SSNs to confirm employment eligibility (Form I-9) and report employee income (Form W-2), while financial institutions may use them to check credit history.
Of course, when hiring employees, keep paperwork with their SSNs in a safe and secure place. Many state laws prevent employers from publicly displaying or disclosing employee SSNs, and some restrict mailing forms with them.
The federal government also forbids employers from using the Social Security Number Verification Service to collect information on a prospective employee until they have accepted an offer or have established their payroll records with the proper documentation.
SSNs never expire and are typically assigned to an individual for life. However, a person may qualify for a new one if they experience harassment, abuse, or danger when using it or if they are a victim of identity theft. Changing your SSN doesn’t automatically delete the old one—the SSA, other government agencies, and some companies may still keep records under your original number.
How to get a Social Security number
The application process for an SSN is free and straightforward.
Visit the Social Security Administration (SSA) website or your local Social Security office and complete Form SS-5. In addition to your application, you’ll submit proof of identity, age, and US citizenship or immigration status.
Once your application is approved, expect to receive your Social Security card via mail in two to four weeks.
What is an Employer Identification Number?
An Employer Identification Number (EIN) is a nine-digit federal tax identification number (formatted XX-XXXXXXX) for businesses.
If your business meets one of the following qualifications, you probably need to apply for an EIN:
Has employees and pays them wages
Is a multi-member LLC
Operates as a corporation or partnership
Sponsors a retirement plan, such as a solo 401(k)
Has been bought or inherited
Has filed for bankruptcy
Some businesses, like sole proprietorships and single-member LLCs (SMLLCs) without employees, don’t need an EIN.
What is an Employer Identification Number used for?
Think of an EIN as an SSN for your company. Note that business registration is handled at the state level, so companies in different states can have the same trade name, also known as a Doing Business As (DBA) name.
Giving companies a unique EIN allows federal and state governments to distinguish between companies with similar business “nicknames” and prevent mixups. This also means that, if you have multiple businesses, each one may need its own EIN.
Business owners must have this number to hire employees or form a multi-member LLC, corporation, or partnership. Financial institutions need it when opening a business bank account and applying for a business loan or other lines of credit, although some make exceptions for sole proprietorships and SMLLCs.
State and local government agencies require an EIN when applying for a business license and permit. The federal government requires it when reporting and paying taxes (such as federal income, Social Security, and Medicare taxes).
EINs are permanent and don’t expire, so new ones are only needed under special circumstances. For example, if your company experiences a major change—such as in ownership or business structure—it’s recognized as a new legal entity and requires a new EIN.
Guidelines differ slightly depending on what entity your organization currently operates as and what you plan to do with it, so consider consulting your lawyer about your specific situation.
The IRS doesn’t cancel EINs automatically. The only way to do so is by closing your IRS business account.
How to get an Employer Identification Number
The EIN application is free and can be completed online or by phone, mail, or fax.
Applying online
Follow the steps on this IRS webpage for your free EIN. Once your application is submitted and the information verified on the spot, you will receive your official EIN confirmation immediately.
Applying by phone
International applicants must apply for an EIN by calling 267-941-1099 (not a toll-free number) between 6 a.m. and 11 a.m. ET Monday through Friday.
Completing Form SS-4 can help prepare you for the call. Once your representative establishes your account, you’ll receive your tax identification number during the call.
Applying by mail
Mail your completed EIN application to the proper address to receive your EIN by mail in four to five weeks.
If your business (or legal residence, if you’re operating as a sole proprietor or SMLLC) is located in one of the 50 states or the District of Columbia, you’ll send your application here:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
If you’re located outside of the US, use the following address instead:
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Applying by fax
When applying by fax, make sure your cover sheet includes your fax number. The IRS will send your EIN to that number in about four business days.
If your business (or legal residence) is in one of the 50 states or DC, fax the form to 855-641-6935.
If your business operates outside of the US, use 855-215-1627 if you’re currently located in the US and 304-707-9471 if you’re not. Long-distance charges may apply.
Other ways to prepare
Regardless of application method, you’ll need the following information:
Applicant’s legal name
Legal name and tax ID number (either an SSN or ITIN) of the true principal officer, general partner, grantor, owner, or trustor—called the “responsible party” by the IRS
Company’s legal name, trade name (if applicable), address, and type of business entity
Number of members, if applying as an LLC
State or country of incorporation, if applying as a corporation
Date the business was formed or acquired
Primary activities of the business
The maximum number of employees expected in the next 12 months, and the first date wages were paid
Do you need a state EIN, too?
A state tax identification number (or state EIN) is separate from the EIN used to file federal taxes, although they serve similar purposes.
Nearly all states require you to pay business taxes in the form of income, employment, or gross receipts taxes—meaning you may need to register for a state EIN to do so. But even these outlier states still require an identification number to hire employees, so you’ll likely need to file for a state identification number if planning to expand your business.
The application process is similar to the federal one, but check your state’s tax department for specifics.
What is an Individual Taxpayer Identification Number?
An Individual Taxpayer Identification Number (ITIN) is another nine-digit tax identification number (formatted XXX-XX-XXXX) for individuals who do business in the United States and must pay taxes but aren’t eligible for an SSN—such as foreign nationals or undocumented immigrants.
What is an Individual Taxpayer Identification Number used for?
ITINs are only used for tax identification and reporting purposes, not for other purposes.
Most importantly, an ITIN doesn’t authorize its owner to work in the US, receive Social Security benefits, or qualify dependents for an Earned Income Tax Credit (EITC). While undocumented immigrants are required to pay taxes, they don’t receive many of the benefits. If the person you want to hire needs work authorization, you may consider the H-1B visa and contact your employment attorney.
The Protecting Americans from Tax Hikes (PATH) Act includes guidelines requiring certain ITIN holders to renew their tax identification number if they plan on using it to file their returns.
For instance, all ITINs issued after December 31, 2012, must be renewed every five years, and also expire if unused to file tax returns in three consecutive years. Some older ITINs before 2013 may also need renewal.
The IRS doesn’t notify those with expiring ITINs, but you can renew your ITIN by submitting IRS Form W-7 (discussed later). If your ITIN will expire before the federal tax deadline but you plan on using it to file this year’s taxes, the IRS recommends renewing it quickly to prevent tax return processing delays.
If you use an expired ITIN, the IRS will still accept your return and mark it as filed on time, but your refund may be delayed, and you might not receive the exemptions or credits you claimed until you renew your ITIN.
For more information, visit the IRS website.
How to get an Individual Taxpayer Identification Number
Individuals interested in applying for an ITIN must fill out Form W-7 and include a copy of their federal income tax return plus proof of identity and foreign status.
Applicants can mail the documents to the IRS or apply in person at an IRS walk-in office or with an IRS Certified Acceptance Agent. After about seven weeks, applicants should receive their ITIN by mail.
If you need to renew your ITIN to file federal taxes, you must fill out Form W-7 and include the following:
Your reason for needing the ITIN
Your original identification documents (or certified copies) from the issuing agency (e.g., U.S. Citizen and Immigration Services, or your embassy or consulate) and any other required documentation to support your application
You can file your ITIN renewal by mail, at your local IRS Taxpayer Assistance Center, or with an IRS Acceptance Agent. The IRS will notify you via mail after about 7 weeks (or 9 to 11 weeks if you renew between January 15 and April 30 or from overseas).
Keep in mind that, unlike primary taxpayers, spouses or dependents can’t preemptively renew their ITINs. They can only renew their tax number when filing an individual tax return or if someone else claims them on a tax return for a tax benefit. If this applies to you, you’ll attach a federal tax return to your W-7 renewal form.
EIN vs. SSN vs. ITIN: Differences you should know
Let’s break down the distinctions between these three numbers.
ITIN vs. SSN
SSNs are held by US residents and authorized non-citizen residents (like green card holders and students on visas) only.
ITINs are for US residents with foreign status and foreign entities (including partnerships, corporations, and LLCs) that do business in the country.
ITINs are for tax purposes only, while SSNs offer additional benefits and access to other social services. Certain non-citizens need an SSN to work in the US or an ITIN to do business in the US.
However, no one should have both an SSN and an ITIN. If you originally had an ITIN and then received an SSN later, you must notify the IRS so they can consolidate your tax records under your SSN.
EIN vs. ITIN
An ITIN is like an EIN for individuals who are ineligible for an SSN. It allows those who are required to pay US income taxes—such as non-resident foreign national business owners and entrepreneurs—but don’t have an SSN to file their returns with the IRS.
However, an ITIN doesn’t authorize US employment and can’t be used to complete a new hire’s Form I-9.
EIN vs. SSN
EINs and state tax identification numbers function like SSNs for businesses, allowing government agencies to identify and track them for tax purposes.
Most companies need an EIN and state tax identification number to conduct most business dealings, but single-member entities that pay taxes through the owner’s personal returns (called disregarded entities) don’t necessarily need them. In fact, some disregarded entities must use their SSN when filing business taxes, particularly on information returns and income tax-related reporting, such as Form W-9.
On the other hand, single-member LLCs must use an EIN when reporting and paying employment and excise taxes. Some banks require an EIN when opening a business account, while vendors or clients may also need your EIN to process payments.
If your disregarded entity must report income on state tax returns using an EIN or pay state taxes (such as employment or excise taxes), your company must register for a state tax identification number. Tax laws vary between states, so check with your tax professional for details.
Which taxpayer identification number should you use for your business?
As mentioned earlier, most businesses (S corps, C corps, partnerships, and any entity with employees) that are registered with the IRS will need an Employer Identification Number, even if they don’t have any employees. And as any tax preparer will tell you, having an EIN is also important because it helps separate personal and business finances.
SSNs and ITINs are only used in a business capacity if you’re running a company that’s not required to file taxes separately from its owner. For example, most sole proprietorships and single-member LLCs that are not incorporated and have no employees use the owner’s SSN or ITIN to file business taxes since they go through the owner’s personal returns.
What happens if you use the wrong TIN on your tax return?
If you make a mistake on your US tax return, chances are the IRS will notify you to correct it.
Of course, with so many documents going in and out of the department, they may miss it. If you catch the mistake before they do, correct it as soon as possible.
Why? If the change results in you owing more in taxes than you thought, the IRS may decide to charge you interest and penalties from the due date of your tax return until the day you repay the debt—and no one wants that.
Are there penalties for not using the correct tax identification number on your return?
If the IRS catches a mistake, they note it as a Failure to File Correct Information Returns and impose a penalty for every return with incorrect information.
The bright side: The IRS issues one penalty for each return, regardless of how many details are incorrect. If they find multiple mistakes on the same return, though, they’ll use the mistake with the greatest penalty amount for your fine.
Additionally, if you wait to correct mistakes, the IRS will penalize you accordingly. There are also no maximum penalty limitations if the agency decides that the mistakes were made out of “intentional disregard,” and they might even file a criminal suit against you.
If you file taxes with the wrong TIN, how can you correct it?
If you’re a business owner filing through your personal returns, you can correct your mistake with Form 1040-X. Send the completed form along with an explanation of the changes and any other updates made to the relevant schedules.
The process is similar for other business entity types, although the form for amending your original return will differ:
Corporation: Form 1120x
Partnership or multiple-member LLC: Form 1065X
Amending tax returns for S corporations differs slightly. To correct a mistake for this business type, you’ll file a new Form 1120-S with the updated information for your business, along with an explanation of the changes made. Make sure to check the box on page one that says “amended return” (or “superseding,” if you’re filing it before the form’s original deadline).
You’ll then prepare updated Schedules K-1 and amended personal tax returns (using Form 1040-X) with the new information.
SSN vs EIN vs ITIN: Which one is right for you?
Having the right tax identification numbers—and using them in the right settings—is important, especially as your company grows.
Some things to keep in mind:
SSNs are used by individuals for employment and tax purposes.
EINs are used by businesses for hiring employees, filing taxes, and managing finances.
ITINs are used by individuals who are not eligible for an SSN when filing taxes.
Because different business entities have different needs and guidelines, contact a tax pro for guidance.
FAQs
Can someone have both an EIN and an SSN at the same time?
It’s common for business owners to have both an SSN and an EIN. Your SSN identifies you as an individual taxpayer, while your EIN identifies your business for tax purposes.
Does using an EIN instead of an SSN help protect against identity theft?
Although it doesn’t eliminate your risk, using an EIN instead of your SSN can reduce the risk of identity theft. Limiting how extensively you share your SSN helps reduce exposure to potential fraud. Separating your SSN from your business provides an extra layer of protection for your personal finances if your business is compromised.
What happens if you use the wrong taxpayer identification number on a tax form?
Using an incorrect taxpayer identification number may result in the IRS requesting a correction, or even lead to interest, penalties, or legal action.
Can an EIN or ITIN ever expire or need to be renewed?
An EIN is permanent and does not expire. Renewal may only be necessary if the business undergoes significant changes. An ITIN can expire if unused for three consecutive years and must be renewed to file taxes.
