As an employee or a business owner in the US, you must be aware of Tax Identification Numbers (TIN) to file your taxes. All TINs are issued by the Internal Revenue Service (IRS) except Social Security Number (SSN) and are required on all tax returns filed with the IRS.
Individuals are assigned TINs in several different forms like Employer Identification Numbers (EINs) and Individual Taxpayer Identification Numbers (ITINs).
But what is the actual difference between EIN and ITIN numbers?
Many people get confused on this part.
That's why in this post, we'll guide you through the difference between ITIN and EIN numbers so that you can figure out which one would be the perfect choice for you.
What is an Employer Identification Number (EIN)?
An employer identification number (EIN) is a unique nine-digit number issued by the IRS to identify a business entity. If you're an employer and you need to report taxes, having an EIN is a must. It is a nine-digit number and is formatted as XX-XXXXXXX.
Businesses can apply for EIN numbers directly through the IRS. And you can keep your personal and business funds separate with an EIN. This gives you the ability to safeguard your personal information and prevent identity theft.
If you lose track of your EIN, search for it on the IRS notice that was mailed to you when it was issued. You might also try to recover it by contacting your regular banking institution.
What is an Individual Taxpayer Identification Number (ITIN)?
Non-resident and resident aliens, their spouses, and their dependents who cannot obtain a Social Security number are issued an Individual Taxpayer Identification Number or ITIN. The ITIN is given out by the Internal Revenue Service (IRS).
For example, Undocumented immigrants, who are obligated to file taxes but do not have a Social Security number and cannot receive one, must obtain an ITIN.
Without a Social Security number, one will be unable to identify oneself to the IRS to pay taxes or collect a tax refund without a taxpayer identification number.
When residents of the United States who do not have Social Security numbers or non-resident aliens need to submit a tax return, the IRS issues ITINs.
EIN Vs ITIN: What is the actual difference between EIN and ITIN?
Individuals who aren't eligible for a Social Security Number (SSN) use an Individual Taxpayer Identification Number (ITIN), whereas corporations use an Employer Identification Number (EIN).
Even though they are both tax processing numbers, they are assigned to different entities.
If a business owner does not qualify for an SSN, they may need to apply for an ITIN for personal tax filings and an EIN for business tax filings.
Who Needs EIN?
Before a company can start operating, it must first obtain an EIN. This can be done over the phone, online, by fax, or by mail. If you are a business owner, hire employees, or file taxes, you need to have an EIN.
Who Needs an ITIN?
Anyone who needs to file a tax return with the IRS but isn't qualified for a Social Security number (SSN) must apply for an ITIN. Non-resident aliens who are required to file a federal tax return in the United States, for example, should have an ITIN. You also need ITIN for the following conditions:
- A US resident immigrant who is filing a US tax return (based on days spent in the US).
- A non-resident foreign visa holder's dependent or spouse
- Non-resident foreigner seeking a tax treaty advantage
- Non-resident alien student, professor, or researcher filing a tax return in the United States or claiming an exemption
Do you need an ITIN if you have an EIN?
If you just need to file a US tax return, you would need an ITIN.
But if you are starting a business, then you need an EIN.
ITIN and EIN are not related. So, it doesn't matter if you have an ITIN or not when you apply for EIN.
However, while you have EIN to file your taxes for your business, you need ITIN to file your US tax returns if you are a US resident immigrant, non-resident foreign visa holder's dependent, non-resident foreigner seeking tax advantage, or non-resident professor, student, or researcher who wants to file a tax return in the US.
In the above cases, even if you have an EIN, you would need an ITIN.
Can you use EIN instead of ITIN?
The IRS uses EIN and ITIN to differentiate taxpayers. The ones who use EIN to file tax returns are business owners, while those who use ITIN to file their returns are individual taxpayers.
A third element called Social Security Number (SSN) and ITIN can be used interchangeably when filing taxes. But EINs and ITINs are entirely different. You cannot use EIN instead of ITIN to file your individual returns.
EIN Vs ITIN - Conclusion
Apart from the fact that they are both TINs, they don't have anything in common. ITIN is for individuals, whereas EIN is for businesses.
Personal taxes are filed with the ITIN (and SSN), whereas business taxes are filed with the EIN.
An EIN is used to identify a business, but an ITIN is used by people who file a tax return but are not permitted to work in the United States.
To put it another way, an EIN is a firm's Social Security number, whereas an ITIN is a form of EIN for people who cannot work in the United States yet do business there.
Because it permits them to handle corporate taxes, an ITIN may be deemed an EIN for people who aren't qualified for SSNs.
So this is the actual difference between ITIN and EIN numbers.
