Fazlur Rahman
EIN vs TIN is a common source of confusion, but the answer is simple. TIN is the umbrella term, and EIN is one type of TIN. A taxpayer identification number, or TIN, is any identification number the IRS issues for tax purposes. An EIN is the business-specific TIN that the IRS issues to companies, partnerships, and nonprofits.
What a TIN actually covers
The IRS issues four kinds of TINs. The SSN is the individual one, and every working American has one. The EIN is the business one, used by companies, partnerships, LLCs, and nonprofits. The ITIN is for non-residents who need a US tax ID but do not qualify for an SSN. The ATIN is for dependent children of US citizens abroad who need to be claimed on a tax return.
The terms are nested. When the IRS asks for a TIN on a form, they want whatever number applies to the filer. A W-9 from a sole proprietor is filled out with an SSN. A W-9 from a corporation is filled out with an EIN. The form does not care which type of TIN you provide, only that it matches the entity and the IRS records.
What an EIN is used for
Every business with employees needs an EIN to file payroll tax returns. Every partnership and corporation needs an EIN, regardless of whether the owner has employees. Any business that opens a bank account, applies for a business credit card, or files an excise tax return needs an EIN.
A single-member LLC with no employees can use the owner SSN as the business tax ID, but most banks require an EIN to open a business account. The IRS recommends that single-member LLCs get an EIN anyway because the EIN keeps the owner SSN off the public filings that a business is required to make.
What an SSN is used for
An SSN is the individual identifier for a US citizen or permanent resident. It is used for wage reporting, credit reporting, and tax filing. A sole proprietor reports business income on the personal tax return under the owner SSN.
The SSN should not be used as a business identifier on documents that will be public, because it is the same number used for personal credit and banking. A business EIN separates the business identity from the owner personal identity, which is the right call once the business has any public-facing record.
What an ITIN is used for
An ITIN is for non-residents who need a US tax ID but do not qualify for an SSN. It is issued by the IRS after the applicant files Form W-7 with a federal tax return. The ITIN does not authorize work in the US, but it does allow the holder to file a US tax return and to claim dependents on a US tax return.
Spouses and dependents of US citizens abroad often have ITINs. A non-resident business owner with a US-based LLC can get an ITIN for personal tax filing, but the LLC still needs a separate EIN to file business returns and open a US bank account.
How to apply for an EIN
The IRS online application at irs.gov is the fastest path and issues the number in about fifteen minutes. The applicant answers questions about the entity type, the reason for applying, and the responsible party. The IRS validates the information and issues the EIN on screen, with a confirmation letter mailed within a few weeks.
Paper applications through Form SS-4 take four to six weeks. Fax applications take about four business days, with a fax number and instructions in the Form SS-4 PDF. The application is free, and the IRS does not require a third-party service.
Common mistakes to avoid
The most common mistake is using the owner SSN where an EIN is required, which causes the bank to reject the account application or the IRS to reject the tax return. The second is applying for a second EIN for the same entity, which the IRS will not issue and which causes confusion in the IRS records. The third is using a third-party service that charges for the application, which is unnecessary because the IRS issues EINs for free.
When you need both an EIN and an SSN
A sole proprietor with employees needs an SSN for the owner and an EIN for the business. A two-person LLC with one owner-employee and one non-owner member needs the owner SSN for personal tax, the owner SSN for self-employment tax, and the EIN for the business. The most common case where both are visible on the same form is the K-1 issued to a partner, which carries the partner SSN and the partnership EIN.
The honest short version
EIN is a type of TIN. TIN is the umbrella term, and an EIN is the business TIN. Apply for the EIN through the IRS online application at irs.gov, which issues the number in about fifteen minutes. The application is free, and the EIN is required the moment a business has employees, files as a partnership or corporation, or opens a business bank account.
Photo: Emmett Given, Public Domain (NASA), via NASA Image and Video Library (https://images.nasa.gov/details/MSFC-1701348)
