Sorting the confusion between SSNs,TINs, ITINs, and EINs

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If you are confused regarding taxpayer identification numbers, don't feel bad.  Although they are rather straight-forward and it is "technically" clear which you need in a particular situation, they are nonetheless confusing to lay persons, and even professionals that do not routinely apply for assignment of these numbers.  

Just the term Employer Identification Number (EIN) creates confusion, since it is not limited to just employers.  In fact, for this very reason, some financial companies. brokers, and insurance companies will not, on their forms, refer to an EIN, using instead the term Taxpayer Identification Number (TIN), when they clearly are requesting the former and not the latter.  Why?  The only explanation is that they know that your trust, for example, isn't an employer, and you will become confused that the request doesn't pertain to your trust.

There is another example of this type of practice regarding warning on tanks and tank trailers. "Flammable," right?  Well, except for the fact that there is, or at least was, technically no word, "flammable!" The correct word is "inflammable."  To avoid confusion, manufacturers use the "wrong" word rather than the "right," and for good reason- we wouldn't someone pounding, heating, or setting ablaze a tank that was labeled "inflammable," thinking incorrectly that it wouldn't burn or explode, right? In that same way, financial services companies use a more common reference Tax Identification Number rather than Employer Identification Number to "avoid" confusion. 

So let's see if we can clear any confusion.

What are Tax Identification Numbers? 

For the IRS to conduct its business, it must have an easy way to identify each individual, trust, and business or non-business entity. To do this, the IRS requires each individual and entity to have a Tax Identification Number. While most individuals use their Social Security Number (SSN) for filing taxes, most businesses and non-business entities, like trusts, must have a special tax identification number instead.

Please note that  we are referring generally to tax identification numbers.  There is a specific Taxpayer Identification Number (TIN) which the Service usually designates as (ITIN) for "Individual" Taxpayer Identification Number.   

SSN, ITIN or EIN: What’s the Difference?

There are three main categories of tax ID numbers: Social Security Numbers (SSN), Employer Identification Numbers (EIN) and Individual Taxpayer Identification Numbers (ITIN).  SSNs and ITINs are used for individuals. Generally, the ITIN is for those not eligible for an SSN, such as non-resident aliens or resident aliens not yet eligible for a social security number. 

For businesses and non-business entities, like trusts, the EIN is the most important tax identification number. Despite the name including "employer," it suits all businesses, or non-business entities such as a trust, even those with no employees. 

So one of the biggest clues what you need is "to what are you referring as the owner or beneficiary of the asset, account, or benefit?"  If you are referring to a trust, use the EIN for the trust.  

The trust usually uses your social security number if you are the Settlor/Grantor of a revocable trust.  When the trust qualifies as a "Grantor Trust,"  it is a disregarded entity which uses the Grantor's social security number.   

If the Trust is irrevocable, the trust may have a separate EIN, so you will need to either: 1) refer to the Certificate of Trust which will identify the EIN; or, 2) ask your attorney or accountant that obtained the EIN. Most attorneys make clear on the Certificate Trust is the irrevocable trust is treated by the IRS as a separate entity requiring an EIN, and typically will obtain one for the trust. 

Tax ID Numbers for Businesses

Most businesses require a special tax identification number for their filings with the IRS. Many other legal documents for businesses, including loan applications, bank account applications and permit applications, also require a tax identification number. Therefore, one of the first actions to take after setting up your business is to apply for an EIN.

Are There Exceptions?

There are cases in which business owners can use their own social security number rather than an EIN for filing taxes for their business. The two exceptions are sole proprietorships and certain LLCs, as long as the LLC does not have any employees. In these cases, the business owner can use his or her SSN in place of the EIN. However, even sole proprietors might need a EIN under certain circumstances, such as for excise tax returns or pension filings.

You have your choice of business structure, which might impact what type of Tax Identification Number you need. Start your tax ID application to receive your EIN number by filling out the form here. Alternatively, complete a sole proprietorship application and use your social security number instead. Our support team is available 24/7 to assist you with any questions you might have about filing these applications.

Do I Need an ITIN or Social Security Number to Get an EIN?

There are ways to get an EIN for your company without having either a Social Security number or an ITIN, but in most cases, you do use those other tax identifiers in your application. That’s because the IRS does require the person who takes responsibility for the registration to have one of these. If you do not have either identifier, you have two options.

• File for either a SSN or ITIN before applying for an EIN so that you can be listed as the point of contact for the company.
• Engage an accountant or lawyer willing to act as that contact for the company and submit their information so they can receive paper records regarding your EIN.

What Are the Differences Between a SSN and an ITIN?

The main difference is that the Social Security number is for those who are eligible for Social Security benefits, either at retirement or in the event of a disability. For residents of the U.S. and non-residents who own businesses in the country, the ITIN provides and individual tax identification option outside of Social Security. This is an important avenue for those who do not qualify for a Social Security number.

Can I Use a Tax ID Number for More Than One Business?

Generally, no. If your business needs its own EIN for any reason, you need to use a unique one that is just for that entity. Entrepreneurs with multiple companies they own as the sole owner, either through sole proprietorship or a single-member LLC, might have the option of lumping all their business taxes under one tax return by using their Social Security numbers and filing with Schedule C. Even then, if any of those businesses hire employees or seek bank loans, they will need their own EIN, and they will not be able to share.

Still Confused?

Your attorney or accountant will usually help you quickly identify and locate the correct number.  Rather than create additional work later, we suggest that clients fax or email the forms they are completing with an indication what they are trying to accomplish.   We usually will simply insert the correct "number" and send it back for completion.  Regardless, if you are confused, ask for help!

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