TIN vs. EIN: Which One Does Your Business Need?
Taxes are a fact of life, both personally and in business. Before you can file any taxes, you need a unique identifier, and you must understand which one to use for personal matters and which for business purposes. If you have been wondering about the difference between a TIN vs. an EIN, you have come to the right place. A TIN and an EIN are also required for other purposes, such as opening bank accounts, applying for loans, and obtaining licenses. Below is more information on the difference between a TIN vs. EIN.
What is an EIN?
An Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is a nine-digit number the IRS assigns to your business for tax and other purposes. Your EIN identifies you to the IRS when filing different types of taxes (payroll, income, etc.). Employers, sole proprietors (with employees), corporations, LLCs, partnerships, nonprofits, trusts, estates, government agencies, certain individuals, and others all use EINs. Whenever you contact the IRS, you use your EIN to identify your business, so the correspondence and information are linked to the proper account.
What is a TIN?
A Taxpayer Identification Number (TIN) is a number used by the Internal Revenue Service (IRS) to identify you. It may be issued by the Social Security Administration (SSA) or the IRS. The SSA issues Social Security numbers (SSNs), and the IRS issues other types of identifiers like EINs. Some types of TINs include:
- Social Security Number (SSN)
- Employer Identification Number (EIN)
- Individual Taxpayer Identification Number (ITIN)
- Taxpayer Identification Number for Pending U.S. Adoptions (ATIN)
- Preparer Taxpayer Identification Number (PTIN)
Difference Between a TIN vs. EIN
A TIN is an umbrella term encompassing many different types of taxpayer identifiers. An EIN is simply one type of TIN used for business. The primary difference between a TIN and an EIN is that individuals use a TIN for filing taxes and other things, whereas an EIN is used for filing business taxes.
You can use an EIN to open business bank accounts, apply for business loans, and file business taxes, including payroll taxes. As an individual, you need to use your TIN to file personal taxes. This is your SSN, if you have one, or your ITIN, if you're a non-US resident or nonresident who isn't eligible for an SSN.
Who Needs an ITIN?
Individuals who do not have U.S. citizenship or are unable to obtain a Social Security Number must apply for an ITIN to file taxes. If you live abroad but do business in the U.S., you also need an ITIN for various purposes. Anyone who falls within the categories below needs an ITIN:
- A non-resident alien who needs to pay taxes.
- A resident alien who needs to pay taxes.
- Non-resident who claims tax benefits.
- Dependent or spouse of a non-resident visa holder.
Who Needs an EIN?
Most business types require an EIN. Regardless of whether you structure your company as a sole proprietorship, partnership, limited liability company (LLC), corporation, or nonprofit, you need to apply for and obtain an EIN or FEIN.
There are some exceptions to this rule. Some sole proprietorships and single-member LLCs can do business without an EIN. In these cases, the individual owner will use their Social Security number (SSN) instead when filing taxes and identifying themselves to clients for tax purposes. As long as you don’t hire employees as a sole proprietorship or single-member LLC and comply with other rules, you don’t need an EIN. However, even if these entities don’t need an EIN, they can still obtain one, and it makes sense to do so; it offers many benefits.
Other Cases Where You Need an EIN
Most businesses need an EIN. Although there are a few exceptions to this rule, most companies will need one because even if they start out small and simple, things may change later. Some of the reasons that a business may require an EIN include:
- Federal Tax Reporting and Compliance
EINs serve as a business equivalent of a Social Security number, enabling the IRS to identify businesses whenever they file taxes or other tax-related documents. EINs are especially critical for corporations, partnerships, and LLCs, all of which are required to have an EIN for federal income tax purposes, regardless of whether or not they have employees. It is used on various IRS forms, such as Form 941 (Employer's Quarterly Federal Tax Return) and Form W-2 (Wage and Tax Statement).
- Employees
If a business has employees, an EIN is necessary for managing payroll and withholding and remitting employment taxes (including federal income tax, Social Security, and Medicare contributions).
- Certain Industries
Businesses involved in certain activities requiring the filing of excise taxes (like those related to alcohol, tobacco, or firearms) also need an EIN.
- Financial and Administrative Tasks
When you open a business bank account, most banks require an EIN, which is crucial for separating business and personal finances. This can help you avoid issues if you ever get audited.
- Applying for Licenses and Permits
Many states and local jurisdictions require an EIN for obtaining necessary business licenses and permits.
- Business Credit
An EIN allows a business to establish its own credit history, separate from the owner's personal credit. This is crucial for obtaining loans, lines of credit, or collaborating with specific vendors.
- Working With Other Organizations
Some organizations, such as nonprofits, may require an EIN from businesses they work with, particularly for grant applications or financial reporting.
- Retirement Plans
Certain retirement plans, like Keogh plans, require an EIN for those who are self-employed or operating unincorporated businesses.
- Identity Theft Protection
By using an EIN instead of a Social Security number (SSN) for business activities, individuals can help protect their personally identifiable information (PII) and reduce the risk of identity theft.
Other situations where you need to have an EIN include:
- Trusts, Individual Retirement Accounts (IRAs), and Tax-Exempt Business Income Tax Returns
- Estates
- Real Estate Mortgage Investment Conduits
- Nonprofit Organizations
- Farmers’ Cooperatives
- Plan Administrators
How to Obtain an EIN
Since most business structures do require an EIN, you should apply for one after registering your company with the Secretary of State. Obtaining an EIN is a relatively simple process. Additionally, applying for an EIN is free; no fees are required.
Obtaining an EIN is easy, and you can use two methods to do so. They are as follows:
- By Mail
Visit the IRS website and download Form SS-4 and print it out. Complete the form with all the information required (see below). Alternatively, you can mail the form to the IRS using the address printed on the form. You may have to wait a bit longer for your EIN to arrive by mail.
- Online Application
You may also choose to submit your application to the IRS digitally. Visit the IRS website and fill out all the fields. Once you have completed and submitted the online application, you will immediately receive your new EIN after the IRS validates the information. Validation takes place during the application process. Once complete, you can download and print your confirmation letter, which includes your EIN.
- By Fax
Visit the IRS website and download form Form SS-4 print it out, and complete it with all the necessary information (see below). Fax your completed form to the number listed on there. If you use fax, the IRS will fax you back a confirmation letter with your new EIN within four business days.
The online application option is by far the fastest way to get your EIN. Fax is the second quickest option, and if you apply by mail, you may have to wait up to four weeks to receive your confirmation letter with your EIN.
What Information is Required for an EIN?
When applying for an EIN/FEIN, you must provide the IRS with detailed and specific information about yourself and your business. Those details are as follows:
- The legal name of your business. If you have registered the sole proprietorship under your name, then you will use that. If you have a trade name, “Doing Business As (DBA)” name, you must include that as well.
- Your business’s legal address, including state and country.
- Your name and tax ID (SSN). As a sole proprietorship, you will have the authority to control and manage the business, funds, and all assets.
- The type of entity (corporation, LLC, sole proprietorship, partnership) and the date you started the business.
- Does your business involve gambling, and do you sell alcohol, tobacco, or firearms?
- You must provide the reason you are applying for an EIN. Some examples are acquiring an existing business, starting a new business, or hiring employees.
- The highest number of employees you expect to hire within the next 12 months. You must also designate when you will pay employment taxes (annually or quarterly) and the first date you paid wages to your staff.
Along with the information above, you must also identify your business type from the list of industries below. Use your best guess if nothing matches up perfectly.
- Accommodation & food service
- Construction
- Manufacturing
- Finance & Insurance
- Healthcare & social assistance
- Retail
- Real estate
- Rental & leasing
- Transportation & warehousing
- Wholesale-agent/broker or Wholesale-other
- Other
FAQs
If an individual is unable to obtain an SSN, then they must apply for an ITIN using Form W-7. Anyone doing business in the U.S. and any individual who is also an employer, trade, or business working as a sole proprietor must have an EIN.
In most cases, you can use a TIN in place of an EIN, but you cannot use an EIN in place of a TIN. Most often, you can obtain a TIN immediately after verification, and it doesn’t cost you anything. Although you can sometimes get an EIN immediately, it may take longer at other times, depending on state guidelines and the verification process.
Most often, the majority of LLCs will need an EIN, especially if they have employees or a retirement plan (401 (k)). Single-member LLCs classified as disregarded entities do not require an EIN, but they can obtain one if desired. The individual running it will use their SSN to file taxes; this is called “pass-through taxation.”
A business license is required in many industries and is usually issued by state or federal government offices. They may also be referred to as a “company license number,” and you must follow a specific process (usually involving experience, training, and fees) before obtaining one. Your EIN, or Employer Identification Number, is a taxpayer identification number used by the IRS to identify your business. A business license number is not the same as your EIN.
Yes, you can. Most people have an SSN or ITIN, and they may also have an EIN. You can provide either one to clients, and they will use it on your 1099 to report the income. The primary difference between the two is that the TIN is used for filing company taxes, while an EIN is typically used to report the taxes of your employees.
If you hire workers who do not have an SSN but do have an ITIN, you can use that to file your taxes and report their income. However, you should treat these workers as independent contractors rather than employees and report their income on Form 1099, rather than Form W-2.
Yes. Most banks will require an LLC to have an Employer Identification Number (EIN) to open a business bank account. Banks require a federal tax ID to separate business and personal finances. However, the owner of a single-member LLC can use their own Social Security Number (SSN) to file taxes using pass-through taxation. Even if they don’t have to get an EIN, they should. There are many benefits to using one.