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What is the Difference Between a Tax ID, Employer ID, and ITIN?


Question: What is the Difference Between a Tax ID, Employer ID, and ITIN?

A Taxpayer Identification Number is a generic term used by the Internal Revenue Service to designate the types of number which it allows to be used for tax purposes. The possibilities for types of Taxpayer ID numbers include:

Taxpayer ID Numbers for Businesses
A sole proprietorship commonly uses the owner's Social Security number for the tax number for the business. Since the business files and pays taxes through the owner's personal tax return, the SSN is the only Taxpayer ID Number needed.

An Employer ID number (EIN) is used by all other types of businesses, even if the business has no employees. Banks often require a new business to have an EIN before they can open a business bank account. You can apply for an EIN online at the IRS website.

Taxpayer ID Numbers for Individuals
Most individual taxpayers have a Social Security number to use for tax purposes. But some individuals do not have the SSN; these individuals use an ITIN, or Individual Taxpayer ID Number. This number is for individuals, not businesses, and it is used for tax processing purposes for those who are not eligible for Social Security numbers. An ITIN is used by foreign nationals or immigrants or their spouses. It cannot be used to verify eligibility for work or for Social Security benefits.

Note: An an employer, you can accept an ITIN from an individual for tax purposes (for filling out a W-4 at hire, for example), but the IRS says an ITIN is not to be used for identification purposes or for benefits, like Social Security.

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