Can I Use an EIN Instead of an ITIN?
Clarify the distinct purposes of EINs and ITINs for U.S. tax identification. Discover which number is appropriate for your entity or individual tax obligations.
Tax identification numbers are fundamental to the U.S. financial system, identifying individuals and entities for tax purposes. The Internal Revenue Service (IRS) issues several types, each designed for specific situations. Understanding the distinctions between these identifiers is important for compliance. This article explores the Employer Identification Number (EIN) and the Individual Taxpayer Identification Number (ITIN), clarifying their unique roles and application processes.
Understanding Employer Identification Numbers
An Employer Identification Number (EIN) is a nine-digit federal tax identification number issued by the IRS to identify business entities. It functions much like a Social Security Number (SSN) for businesses, facilitating federal tax reporting.
An EIN is generally required for businesses with employees, or those operating as a corporation or partnership. It is also needed for filing certain tax returns (such as employment, excise, or alcohol, tobacco, and firearms taxes), or withholding taxes on income paid to non-resident aliens. Even a sole proprietorship, which typically uses the owner’s SSN, may need an EIN if it hires employees or establishes a Keogh retirement plan. This number is also used for opening business bank accounts, applying for business licenses, and securing business loans.
Understanding Individual Taxpayer Identification Numbers
An Individual Taxpayer Identification Number (ITIN) is a nine-digit tax processing number issued by the IRS for individuals who need a U.S. tax identification number but are not eligible for an SSN. ITINs always begin with the number nine and are formatted similarly to an SSN (e.g., 9XX-XX-XXXX).
An ITIN allows individuals to comply with U.S. tax laws and file federal tax returns. This includes non-resident aliens who need to file a U.S. tax return, resident aliens based on the substantial presence test, and spouses or dependents of U.S. citizens or resident aliens who do not qualify for an SSN. An ITIN is solely for tax reporting and does not grant work authorization, provide eligibility for Social Security benefits, or imply immigration status.
Distinguishing EIN and ITIN Use Cases
The distinction between an EIN and an ITIN lies in their intended use: an EIN identifies business entities, while an ITIN identifies individuals for tax purposes when an SSN is unavailable. An EIN is a business tax identification number for entities such as corporations, partnerships, and certain trusts. Businesses use their EIN for all federal tax-related matters, including filing business income tax returns, managing payroll, and opening business bank accounts. It separates the financial identity of the business from the personal finances of its owner.
An ITIN, conversely, is for individuals who file U.S. tax returns or claim tax treaty benefits but are not eligible for an SSN. This includes foreign nationals with U.S. source income, or individuals claimed as dependents on a U.S. tax return who lack an SSN. For example, an individual filing Form 1040 would use their ITIN if they do not have an SSN. Even if an individual owns a business with an EIN, they still need their own SSN or ITIN to file their personal income tax return, especially for reporting pass-through income from entities like sole proprietorships or partnerships.
The two numbers are not interchangeable. An EIN cannot be used for individual tax purposes, nor can an ITIN be used to identify a business entity. Attempting to use an EIN in place of an ITIN for personal tax filings, or vice versa, would result in incorrect tax reporting and potential processing delays. Each number serves a distinct legal and tax identity.
Obtaining an Employer Identification Number
Obtaining an Employer Identification Number (EIN) is a straightforward process, typically completed through the IRS. The most common and efficient method is to apply online via the IRS website, which allows for immediate receipt of the EIN.
Applicants need to provide specific information, including the name of the responsible party, the entity type (e.g., sole proprietorship, partnership, corporation), and the reason for applying. Other application methods include faxing Form SS-4, which usually yields an EIN within four business days if a fax number is provided. Submitting the application by mail can take approximately four to six weeks. International applicants can apply by phone.
Obtaining an Individual Taxpayer Identification Number
Obtaining an Individual Taxpayer Identification Number (ITIN) is more involved and requires specific documentation. The primary method involves submitting Form W-7 along with a valid U.S. federal income tax return. The tax return should have the SSN field left blank, where the assigned ITIN will later be entered.
Applicants must provide original documents or certified copies from the issuing agency to prove foreign status and identity. A valid passport is often preferred as it satisfies both requirements. Other acceptable documents include national identification cards, foreign driver’s licenses, or civil birth certificates for dependents.
Form W-7 and supporting documents can be submitted by mail to the IRS ITIN Operation in Austin, Texas. Alternatively, applicants can apply in person at designated IRS Taxpayer Assistance Centers (TACs) that offer ITIN services, where some documents may be authenticated and returned immediately. Another option is to apply through an IRS-authorized Certifying Acceptance Agent (CAA), who can review and certify original documents, eliminating the need to mail them to the IRS. Processing times for ITIN applications can range from seven to fourteen weeks, potentially longer during peak tax season.