For international entrepreneurs expanding into the U.S. market, understanding the various types of tax identification numbers is essential. The key identifiers are the Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Social Security Number (SSN), and the broader category of tax IDs. Each serves a unique purpose in the U.S. tax system, and knowing the differences can help ensure compliance and smooth business operations.
What is a Tax ID in the U.S.?
A tax identification number (Tax ID) is a unique identifier assigned to individuals or businesses by a tax agency. In the United States, the Internal Revenue Service (IRS) issues most tax IDs, while the Social Security Administration (SSA) handles Social Security Numbers. The primary tax IDs relevant to businesses in the U.S. include the SSN, EIN, and ITIN.
Social Security Number (SSN)
The Social Security Number (SSN) is issued by the IRS or the SSA to U.S. residents. This number is primarily used to track individual income and collect taxes. It is essential for employment and social benefits in the U.S. However, SSNs are not available to non-U.S. residents. For non-residents, the ITIN serves as the tax identifier but does not provide employment or social benefits.
Individual Taxpayer Identification Number (ITIN)
The Individual Taxpayer Identification Number (ITIN) is for individuals who:
- Do not have an SSN and are not eligible to obtain one.
- Are required to provide a federal tax identification number or file a federal tax return.
- Are non-resident aliens who need to file a U.S. tax return or claim a tax treaty benefit.
To obtain an ITIN, you must complete Form W-7 and submit it to the IRS, along with proof of identity and foreign status. Foreign members of LLCs or shareholders of corporations need an ITIN to file U.S. federal income taxes and comply with U.S. regulations. If an ITIN is not used for three consecutive years, it expires. However, with Export Manager’s U.S. tax-free plan, clients may not need to obtain an ITIN initially.
Employer Identification Number (EIN)
The Employer Identification Number (EIN) is a tax ID assigned by the IRS to businesses in the U.S. It is required for filing taxes, hiring employees, and opening business bank accounts. To apply for an EIN, you must complete and submit Form SS-4 to the IRS.
With Export Manager’s all-in-one business platform, you can establish an LLC or Corporation in the U.S., obtain an EIN, set up a business bank account, secure a virtual U.S. address, and appoint a Registered Agent.
Key Differences: SSN, EIN, ITIN, and Tax ID
In summary:
- SSN: A tax ID issued by the IRS to U.S. residents, primarily for tracking individual income and employment benefits.
- EIN: The tax ID for businesses, required for tax filing, hiring, and banking.
- ITIN: The SSN equivalent for non-U.S. residents who need to comply with U.S. tax laws.
Both EIN and ITIN can be obtained through Export Manager at competitive prices, ensuring your business meets all necessary U.S. tax and legal requirements efficiently.