What Is the Difference Between an EIN and a Tax ID?

Individuals and businesses often use “Tax ID” and “EIN” interchangeably. While related, these terms represent distinct concepts and serve different purposes within the United States tax system. This article clarifies what these identification numbers are, highlights their differences, and explains how to obtain an Employer Identification Number.

Understanding Tax Identification Numbers (TINs)

A Tax Identification Number (TIN) is a broad identifier used by the Internal Revenue Service (IRS) to track individuals and entities for tax administration. It is a requirement for most tax-related documents and filings. The Social Security Administration (SSA) or the IRS issues these unique numbers.

Several types of TINs exist, each serving a specific identification role. The most common is the Social Security Number (SSN), a nine-digit number issued by the SSA primarily for individuals. It is used for tracking earnings, administering Social Security benefits, and serves as the primary identifier for individual tax purposes. Another individual identifier is the Individual Taxpayer Identification Number (ITIN), issued by the IRS to individuals who need a U.S. taxpayer identification number but are not eligible for an SSN, such as certain nonresident and resident aliens. An Employer Identification Number (EIN) is a type of TIN specifically assigned to business entities.

Employer Identification Numbers (EINs)

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS to identify business entities. This number functions much like a Social Security Number for a business, identifying it for various federal tax filings, including payroll, income, and excise taxes.

Businesses or entities are required to obtain an EIN in several situations. This includes if they:
Have employees.
Operate as a corporation or partnership.
File certain tax returns, such as employment or excise taxes.
Withhold taxes on income paid to nonresident aliens.
Have a Keogh plan.
Operate as a trust, estate, or non-profit organization.
Are a sole proprietorship that hires employees or decides to incorporate.

Key Distinctions and Obtaining an EIN

The distinction between an EIN and a general “Tax ID” lies in their scope and application. “Tax ID” is an umbrella term encompassing all identification numbers used for tax purposes, including SSNs, ITINs, and EINs. An EIN is a specific type of Tax ID used for business entities, whereas an SSN is a Tax ID used for individuals. For instance, a sole proprietor without employees typically uses their SSN for business tax filings, but a multi-member LLC or a corporation must have an EIN.

Obtaining an EIN is a straightforward process, free of charge directly from the IRS. The most common and fastest method is applying online through the IRS website, which usually provides the EIN immediately upon submission. Online applications are available Monday through Friday and must be completed in a single session. Before applying, have the business’s legal name, address, entity type, reason for applying, and the Social Security Number or ITIN of the responsible party readily available.

Alternatively, businesses can apply for an EIN by faxing or mailing Form SS-4, the “Application for Employer Identification Number.” Faxed applications receive an EIN within four business days if a return fax number is provided. Mailing the application takes about four weeks. Ensure all information on Form SS-4 is accurate to avoid processing delays.