Tax Identification Number

Benjamin Franklin famously wrote in 1789 that “in this world nothing can be said to be certain, except death and taxes”. In the United States, almost all transactions and earnings are subject to taxation at the federal or state levels.

How does the IRS keep track of who pays which taxes with over 340 million citizens and more than 33 million businesses in the country? The answer is that it uses tax identification numbers to keep track of taxpayers and attribute tax payments. We’re going to explain what a tax identification number is, what it’s used for, and how to obtain one if you haven’t got one already.

A tax identification number, or TIN is a unique number used by the US Internal Revenue Service (IRS) to identify individuals and entities that must pay taxes.

A TIN is therefore also called a taxpayer identification number. Every taxpayer needs one, and employers need to know them when they make information filings with the IRS. These numbers come in different types and are always issued by the IRS or the Social Security Administration (SSA) in the case of Social Security Numbers. TINs are nine digits long and are unique, never recycled back into the system to be used for different people or businesses.

As all TINs are nine digits long, a billion possible numbers can be used. These numbers are divided into several different types for different purposes, including:

Social Security Numbers (SSNs): Issued by the SSA, SSNs identify individual taxpaying citizens, permanent residents, and temporary residents working in the US. A person’s SSN is used to track them in the Social Security and Medicare systems and to identify them as unique taxpayers with the IRS. SSNs are issued to children, normally shortly after birth, so parents can identify them as dependents on their tax returns.

Employer Identification Numbers (EINs): EINs are also known as Federal Employer Identification Numbers (FEINs) or Federal Tax Identification Numbers (FTINs) to distinguish them from state tax identification numbers. These numbers are used to identify employers, tax-exempt organizations, and other entities and for employment tax reporting purposes.

Individual Tax Identification Numbers (ITINs): ITINS are issued by the IRS to resident and non-resident aliens who aren’t able to obtain SSNs. They are used to identify these people when they file individual income tax returns and can also be used by their payers to identify them.

Adoption Tax Identification Numbers (ATINs): When parents are in the process of adopting a child domestically, they can apply for an ATIN to identify the child if they don’t know or can’t obtain the child’s SSN (the child may not have one). This number is used to identify the child whose adoption is pending so the parent(s) can claim the child as a dependent on their tax return. Once the adoption is finalized, however, the parents can apply for an SSN for the child.

Preparer Tax Identification Number (PTINs): People who are compensated for assisting in preparing or fully preparing federal tax filings for others need to obtain PTINs. These numbers are used to identify the preparer on these tax returns. Enrolled agents, federally authorized tax practitioners, also need PTINs even if they only represent clients or advise them but don’t prepare tax returns themselves.

While SSNs are used to identify and track people through the Social Security system, here we’ll consider the common uses of all TINs. According to the Internal Revenue Code, Section 6109(a), 

“Any person required under the authority of this title to make a return, statement, or other document shall include in such return, statement or other document such identifying number as may be prescribed for securing proper identification of such person.” 

If someone needs to file a tax return with the IRS, they need to provide a TIN to do so. This section of the IRC goes on to say that people whose TINs must appear on the tax or information returns of others must provide them to the filers. Finally, the TINs of tax preparers must also appear on tax filings. 

Tax returns: If you file a Form 1040, U.S. Individual Income Tax Return, you need to identify yourself on it with your TIN. If you pay a professional to prepare your return, you’ll also have to give their PTIN.

Information returns: If you’re a worker, you need to provide your employer with your tax identification number so they can file information returns with the IRS. If you’re an employee, they’ll need your SSN to file your Form W-2, Wage and Tax Statement. If you’re a contractor, your client will need your EIN or SSN to file a Form 1099-NEC, Non-Employee Compensation for you.

Claiming treaty benefits: ITINs can be used by non-resident aliens to claim tax treaty benefits on US income for reduced withholding rates or exemptions. 

State taxes: Some states issue their own tax identification numbers while others allow employers to use their EINs to identify themselves for state tax purposes. Individuals can use their SSNs for state tax filings.

Banking: TINs, SSNs in particular, are used by banks and other lenders to identify borrowers. Individuals’ credit scores and histories are also linked to their SSNs.

If you’re an individual, employer, or representative of some other kind of entity in the US, you need to have a tax identification number of one type or another. If you don’t already have the necessary TIN you require, here’s how to obtain each type:

How to Get a Social Security Number

While you might that that every citizen is automatically assigned an SSN, this isn’t the case. If you need to apply for a job, get a passport, apply for a loan, open a bank account, claim benefits, or pay taxes, you need to obtain an SSN first. Parents can apply for their children, and noncitizens, international students, and foreign workers can apply online to obtain SSNs from the SSA. Survivors of domestic violence can also apply to obtain new SSNs, helping them to change their official identities. Applications require birth certificates or other documentation proving name, age, and date of birth, as well as citizenship or lawful alien status.

Once you apply online, you need to bring your documents to an SSA office for verification. After this, you should receive your SSN card and number within 14 business days.

How to Get an Employer Identification Number

If you have employees, pay employment taxes, and withhold taxes on non-wage payments to a non-resident alien, you need an EIN. You’ll also need one if you operate a partnership, limited liability company, corporation, trust, estate, tax-exempt organization, retirement plan, or a farmer’s cooperative. You first need to legally form your entity. Then, to obtain your EIN, you can apply online or use Form SS-4, Application for Employer Identification Number , to apply. If you fax the form, you’ll get your EIN within four days, but if you post it, this can take up to four weeks. By applying online, you can obtain your EIN in minutes.

How to Get an Individual Tax Identification Number

You can apply for an ITIN with the IRS if you are ineligible for an SSN and you need to file a tax return, claim a refund or an allowable tax credit, or want to be claimed as a spouse or dependent for a tax credit. You’ll normally apply for your ITIN by filing Form W-7, Application for Individual Taxpayer Identification Number along with the tax return for which you need your ITIN for. You can apply by mail or in person at an IRS Taxpayer Assistance Center with ITIN services.

How to Get an Adoption Tax Identification Number

If you are currently adopting a child, you will need an ATIN to claim the child as a dependent. You can obtain the ATIN by filing Form W-7 A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. It can take four to eight weeks to get this number.

How to Get a Preparer Tax Identification Number

If you are a tax professional paid to assist or fully prepare tax returns, you need to obtain a PTIN. You’ll need to register an account with the online PTIN system and then apply for your number. This takes about 15 minutes.

Tax identification numbers come in several different type,s but some kind of TIN is needed if you will pay taxes, employ workers, manage an entity, or claim spouse or dependent status in the U.S. Most people use their SSNs as their TINs, but other types can be used for different applications. The IRS and SSA make applying for TINs convenient with multiple options so you can obtain and use your TIN as soon as possible.