During the COVID-19 pandemic, thousands of US businesses suddenly lost their revenue streams. But for those business owners who had filed accurate and timely tax returns, there was a source of relief. The Small Business Administration created the Paycheck Protection Program, which provided struggling businesses with low-interest loans and a generous loan forgiveness plan. However, to apply for the program’s benefits, businesses needed to have a tax identification number.
In fact, any time an individual or business deals with the IRS, they need to have their tax ID number handy—be it a Social Security number (SSN) or a federal employer identification number (EIN). Businesses also typically provide their tax ID numbers when dealing with other businesses, such as when remitting invoices or purchasing goods wholesale without sales tax. In the United States, there’s not one type of tax ID number to rule them all, however, so having a grasp on the different kinds of tax ID numbers and uses for each is crucial so you can be sure you’ve got the right one.
What is a tax ID number?
A tax identification number (tax ID) is a unique number provided by a government to individuals or business entities that pay taxes. It helps governments keep track of who has paid taxes and how much they owe. Most countries have some form of a taxpayer identification number. In the US, there are several different types of tax ID numbers. Sometimes, tax ID numbers can also be used to identify businesses or individuals for non-tax purposes, such as opening a bank account or applying for credit.
Tax ID or federal employer identification numbers (EIN) are also essential for claiming benefits and tax credits, like the PPP loans during the pandemic or Social Security benefits. Properly registering your business and filing a tax return can help protect your business by making it eligible for government assistance during hard times.
Types of tax ID numbers
The type of tax ID number that you need depends on many variables. Different types of businesses, individuals, and tax professionals all need distinct tax ID numbers.
Social Security number
Most permanent residents and all US citizens are issued a Social Security number (SSN)—a nine-digit number that was created to keep track of individuals’ Social Security accounts. The initial purpose of this number was to let individuals know how much they paid into Social Security, a program that provides disability, retirement, and survivor’s benefits. The number has since evolved to become an individual taxpayer identification number as well.
Employers and the Internal Revenue Service use the number to identify individual workers in the US and track whether each person has paid their share of taxes. Social Security numbers are also necessary for claiming benefits from the government, such as unemployment insurance and stimulus checks.
Individual taxpayer identification number (ITIN)
For individuals who are not eligible for Social Security, the IRS will issue a taxpayer identification number. This number is often assigned to immigrants who are not permanent US residents. Permanent residents who are not eligible for a Social Security number also can receive an ITIN. The number is nine digits long and always begins with the number nine.
Federal employer tax identification number (EIN or EITN)
The IRS grants businesses unique nine-digit numbers for tax identification purposes. The EIN is also used to identify a business when applying for credit or opening a bank account. Any type of business can apply for a federal employer identification number, ranging from sole proprietorships to corporations.
Adoption tax identification number (ATIN)
The adoption tax identification number is a temporary number used by parents filing taxes with newly adopted children. This number is usually used when the parents or parent must file taxes before a Social Security number has been issued for the child.
Preparer tax identification number (PTIN)
When a tax preparer is paid to help a business or individual file a federal income tax return, that person must also have a unique tax identification number. To receive a PTIN, the preparer must pay a fee of $30.75 to the IRS and spend about 15 minutes filling out an online form.
Do you need a tax ID number?
Almost all types of businesses need a tax ID number, but the IRS does list some exceptions. If a business has no employees, does not operate as a corporation or partnership, does not pay excise taxes, and meets several other requirements listed on the IRS website, it may not need a tax ID number. This most likely would be limited to tax-exempt sole proprietors with little to no income.
However, even if your business is not legally obligated to have a tax ID number, a tax ID is still necessary for obtaining a bank account. Not having a tax ID number can also prevent you from collecting benefits issued by government agencies.
How to get an employer tax ID number
Businesses can obtain a federal employer tax identification number online on the IRS website, via fax, by mail, or by telephone. If applying by fax, mail, or phone, the applicant must fill out IRS form SS-4, which is one page long and asks for details about the business’s structure, employees, and demographics.
If applying online, the applicant will submit the same information and receive an EIN immediately.
If applying by fax, the EIN will be delivered in about one week. If applying by mail, it will take between four and five weeks. The IRS does not provide information about the length of time to receive an EIN if applying by phone.
Tax ID numbers FAQ
Is tax ID the same as SSN?
A Social Security number, or SSN, is a type of tax ID. However, there are other types of tax identification as well, including employer identification numbers and preparer identification numbers.
Can you use your SSN as a tax ID?
Yes, you can use your SSN as a form of tax identification. However, if you are the owner of a business, you may need to apply for an employer identification number to pay taxes on business income.
Can a tax ID number be 10 digits?
In the US, all tax ID numbers have nine digits. In other countries, this is not necessarily the case.
Where can I find my US tax ID number?
Your tax ID number can be found on previous tax returns and any other forms filed with the IRS. If you are using your SSN as a form of tax identification, it can be found on your Social Security card.