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Difference Between Tax ID and EIN

Tax is one of the most common things we encounter in our lifetime and so, it is almost inevitable for us to get the tax identification number (or TIN). Well, there are actually a lot of acronyms used by the IRS to identify the different types of taxpayers. There are many numbers that can be used for tax identification purposes, so understanding each one of them and the differences between them is important.

What is Tax Identification Number (TIN)?

A Tax Identification Number (TIN) is a generic term used by the IRS for the tax identification purposes. TIN is a unique nine-digit number issued to individuals, businesses or other entities to track tax obligations and payments made to the Internal Revenue Service (IRS). Tax ID numbers are primarily used to track payments to individuals for tax purposes in the United States. Mainly, you are required to apply for a TIN on or before application for business registration is submitted and filed before filing a return statement or declaration as specified in the tax code. Typically, there are three common types of tax ID numbers – Social Security Number (SSN), Taxpayer ID Number (TIN) and Employer ID Number (EIN).

Employer Identification Number (EIN)

Employer Identification Number (or EIN) is a unique identification number assigned to businesses for tax purposes. EIN is similar to TIN, but instead of individuals, it identifies businesses for tax purposes. In order to have a legal U.S. business presence, the business must obtain a federal employer ID number from the IRS. All business entities, in addition to individuals who employ other persons, should have a federal employer ID number. It is similar to a social security number, but it is meant for businesses only. If you’re a business owner, you must obtain an EIN to open a business bank account, file your tax returns, and apply for business licenses.

Difference between Tax ID and EIN

Identification

 – Businesses that are registered with the IRS have to obtain an employer identification number (EIN) for tax purposes. It is similar to a social security number, but it is meant for businesses only. EIN identifies businesses for tax purposes. Tax identification numbers, in general, are unique nine-digit numbers used by the IRS to identify individuals or business entities. There are three common types of tax ID numbers – Social Security Number (SSN), Individual Taxpayer ID Number (ITIN) and Employer ID Number (EIN).

Purpose

 – Tax identification numbers, including employer identification number (EIN) are primarily used by the IRS to track payments to individuals for federal income tax and other tax purposes. If you’re a business owner, you must obtain an EIN to open a business bank account, file your tax returns, and apply for business licenses. Tax identification numbers are issues by the IRS in the administration of tax laws. The Federal tax ID number is used to identify an entity to the IRS, banks and other businesses.

Tax ID vs. EIN: Comparison Chart

Summary

To have a valid employer ID number (EIN), the employer must have a legal business presence in the United States and it is required to obtain the EIN from the IRS for tax and identification purposes. EIN is primarily issues to report employment taxes, file annual tax returns, issue payroll documents, pay federal taxes, and so on. EIN is one type of tax identification numbers, just like a social security number, which identifies an individual. Similarly, EIN identifies a business for tax purposes. Just as persons living in the U.S. have unique identification numbers called social security numbers, businesses in the U.S. are issued unique identification numbers called the EINs.

Do I need a tax ID or EIN?

Depending upon the type of taxpayer you are, you need to obtain either of the tax identification numbers. While all are unique nine-digit numbers issued by the IRS, EIN is meant for businesses only. So, if you’re a business owner, you need to have an EIN to open a business bank account.

Is sales tax ID and EIN the same?

If you’re a business owner who sells products or services in a state that charges sales tax, then you are required to have a sales tax ID number for your business. This can be issued on the state or federal level, while EIN are strictly issued on the federal level.

Is an EIN a tax ID?

Yes, EIN is one of the three main types of tax identification numbers, the other two being social security number (SSN) and individual tax identification number (ITIN).

Does it cost money to get an EIN?

Applying for an EIN is a free service offered by the IRS and as a business owner, you can apply for one in various ways.

Is Business ID the same as tax ID?

Business ID number is a type of tax identification number used by the IRS to identify business for tax purposes. Like social security number, business ID is a unique identification number that never expires and is never reissued to other business entities.

Can I look up a business by EIN?

If the company or business is publicly traded, then you can look up its EIN on SEC filings or check with the business’s credit report for a nominal charge, or you can use any paid EIN database.

Can I verify EIN online?

To verify your EIN, you need to go the IRS website and perform an Exempt Organization Select Check about non-profit organizations.


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References :


[0]Murray, Jean. “Tax ID number, Employer ID number, and ITIN? What Are the Differences?.” the balance small business, Dotdash Publishing, https://www.thebalancesmb.com/tax-id-employer-id-397572. Accessed 30 June 2021.

[1]Reuting, Jennifer. Limited Liability Companies For Dummies. New Jersey, United States: John Wiley & Sons, 2019. Print

[2]Image credit: https://irs-taxid-numbers.com/wp-content/uploads/2019/04/ITNS-GEN-FEIN-What-is-an-FEIN-Federal-EIN-FEIN-Number-Guide-v1-1.jpg

[3]Image credit: https://live.staticflickr.com/65535/50991682681_72484a1955_b.jpg

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