There seems to be a lot of people who find themselves confused by all the different tax-related documents and ID’s. In particular, they are unsure if their Tax ID is the same as an Employer Identification Number.
This article seeks to succinctly answer these questions by providing a breakdown of the basic things you need to know about these vital documents. After all, there is simply no way to avoid these things. Everything we do is subject to taxation. In an effort to shed light on these matters, we shall explain the particular functions of each document.
Tax ID, Employer ID, and ITIN: What’s the Difference?
Right off the bat, it is vital that you know that the Internal Revenue Service makes use of several types of control numbers. As one would expect, these are used by the IRS to effectively identify and monitor the state of one’s taxes. The generic term used for these numbers is the Taxpayer Identification Number (TIN).
The term encompasses several types of control numbers used by the IRS. Presented below are a couple of examples. Each of these serves a specific purpose, so pay attention to the way they are used. Keep in mind that they are used to monitor specific activities and have their own well-defined scopes.
- Social Security Number (SSN) – This is probably one of the most easily-recognizable examples of a control number. As you are probably aware, one’s social security number is used by the Federal government to identify every active American citizen in the workforce. It also covers immigrants working in the United States.
It keeps tracks of one’s work history, income, and tax information. On top of that, it also keeps track of your social security contributions during your years of active employment. This information is vital as it will ultimately determine the amount you will get for your pension once you retire. Needless to say, it is one of the most important documents to have.
- Individual Taxpayer ID number – An ITIN is a control number issued to individuals who are not eligible for an EIN and an SSN. It is usually issued for resident aliens who have yet to meet the requirements for a social security number.
- Employer Identification Number – This particular control number is issued specifically to businesses and business owners. Before anything else, readers need to understand that the EIN is also known as the Federal Employer Identification Number (FEIN). At the same time, it is also commonly referred to as the Federal Tax Identification Number (FTIN). Keep in mind that all these essentially mean the same thing. It is vital that you do not get confused about it.
Basically, the EIN the IRS makes use of this nine-digit number to keep track of its tax reports and remittances. It is vital that readers understand this purpose. So, if you are ever thinking about starting your own company, trust, partnership, estate, or any other business entity, remember that you need to request an EIN from the authorities.
This article presents in detail the specific uses of each Tax ID type, including the EIN.