What Is the Difference Between an ITIN and an EIN?

Tax identification numbers are fundamental for navigating financial and tax obligations within the United States. These identifiers play a central role in how individuals and businesses interact with the Internal Revenue Service (IRS). This article clarifies the distinct roles of Individual Taxpayer Identification Numbers (ITINs) and Employer Identification Numbers (EINs).

Understanding Individual Taxpayer Identification Numbers (ITINs)

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the U.S. Internal Revenue Service (IRS) to individuals. This nine-digit number is for those who are required to have a U.S. taxpayer identification number but do not have, and are not eligible to obtain, a Social Security number (SSN). ITINs always begin with the number 9 and are formatted similarly to an SSN (XXX-XX-XXXX).

An ITIN’s primary function is to facilitate compliance with U.S. tax laws for individuals subject to U.S. tax obligations. Common scenarios requiring an ITIN include nonresident aliens who must file a U.S. tax return, resident aliens (for tax purposes) who do not qualify for an SSN, and dependents or spouses of U.S. citizens or resident aliens. An ITIN does not grant work authorization, provide eligibility for Social Security benefits, or alter immigration status. Its sole purpose is for federal tax reporting and processing.

Understanding Employer Identification Numbers (EINs)

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a nine-digit tax identifier assigned by the IRS to business entities. This number serves as the business equivalent of an individual’s Social Security number, allowing the IRS to identify businesses for tax reporting purposes. EINs are formatted as XX-XXXXXXX.

Businesses, tax-exempt organizations, estates, and trusts generally require an EIN. Common situations necessitating an EIN include having employees, operating as a corporation or partnership, or filing certain types of tax returns such as employment, excise, or alcohol, tobacco, and firearms taxes. Even sole proprietorships or single-member Limited Liability Companies (LLCs) may need an EIN if they hire employees, establish a retirement plan, or wish to open a business bank account. An EIN is fundamental for separating business finances from personal ones and is often required for licenses, permits, and other interactions with government bodies and financial institutions.

Key Distinctions and When Each is Needed

ITINs and EINs both serve as tax identifiers issued by the IRS, yet their fundamental purposes and the entities they identify are distinct. An ITIN is for individuals who need to fulfill U.S. tax obligations but are ineligible for a Social Security number. Conversely, an EIN is assigned to businesses and other entities for tax identification and reporting, akin to a Social Security number for an organization.

An ITIN is personal and tax-related, allowing individuals to file tax returns, report income, and claim applicable tax benefits. It does not confer work authorization or eligibility for federal benefits. In contrast, an EIN is business-related, enabling entities to hire employees, open business bank accounts, obtain licenses, and file business-specific tax returns. An ITIN is for individual tax processing when no SSN is available, while an EIN is for business identification and tax purposes.

Steps to Obtain an ITIN

Obtaining an Individual Taxpayer Identification Number (ITIN) involves completing Form W-7, Application for IRS Individual Taxpayer Identification Number. This form requires personal details such as your full legal name, mailing address, date of birth, country of citizenship, and the reason for needing an ITIN. You must also provide original supporting documents or certified copies to prove your foreign status and identity, such as a passport or a national identity card.

Most applicants are required to attach a U.S. federal income tax return (e.g., Form 1040) to their Form W-7 application, leaving the SSN field blank. The completed application package can be submitted to the IRS in one of three ways: mailing it directly to the IRS ITIN Operation in Austin, Texas; applying in person at an IRS Taxpayer Assistance Center that offers ITIN services; or utilizing an IRS-authorized Acceptance Agent or Certifying Acceptance Agent. Processing times for an ITIN typically range from 7 to 14 weeks, though delays can occur, especially during peak tax season.

Steps to Obtain an EIN

Acquiring an Employer Identification Number (EIN) involves providing information about the business entity to the IRS. The most common method of application is through the IRS online application, which is the fastest way to receive an EIN. This online process typically takes only a few minutes, resulting in immediate issuance of the EIN upon completion. For online applications, the principal business or legal residence must be located in the U.S. or its territories, and the application must be completed in a single session.

Alternatively, applicants can complete Form SS-4, Application for Employer Identification Number. This form requires details such as the legal name of the entity, mailing address, type of entity (e.g., corporation, partnership, trust), and the reason for applying for the EIN, such as starting a new business or hiring employees. A responsible party’s Social Security Number (SSN) or ITIN is also needed for the application. Form SS-4 can be submitted via fax, typically resulting in an EIN within four business days, or by mail, which can take approximately four weeks. International applicants may also apply by phone.