A Tax Identification Number or TIN is a unique numeric identifier assigned by tax authorities to individuals and businesses to handle taxes.
Government agencies use TINs, also referred to as tax ID numbers, to track tax obligations, payments, and filings. Essentially, it’s how tax authorities keep everything organized and ensure individuals and entities follow tax laws.
Knowing how TINs work is crucial to maintaining compliance with local tax regulations if a business operates internationally. Each country might have its own system or name for tax IDs, but the main goal is always the same: uniquely identifying taxpayers in the system.
Is a TIN required?
Tax Identification Numbers (TINs) are essential for tax-related activities in many countries worldwide. The requirement for a TIN varies depending on the specific country and individual circumstances.
While practices differ globally, the U.S. serves as a useful example of when TINs are typically needed.
For individuals, a TIN—often a Social Security Number—is needed if an individual:
- Is employed in the U.S.
- Files U.S. federal or state taxes
- Applies for government benefits
- Opens a new bank account or apply for a line of credit
For businesses, a TIN—typically an Employer Identification Number (EIN)—is necessary if the business:
- Has employees
- Operates as a corporation or partnership
- Files tax returns for employment, excise, or taxes for alcohol, tobacco, and firearms
- Withholds taxes on income (aside from wages) paid to a nonresident alien
- Uses a Keogh or qualifying retirement plan
In many countries, individuals who cannot obtain a standard TIN may need to apply for an alternative identification number for tax purposes.
In the U.S., nonresident aliens and some resident aliens who can’t get a Social Security Number will need an Individual Taxpayer Identification Number (ITIN) if they’re required to file or report taxes in the country.
While only some need a TIN, most financial and tax-related activities in the U.S. require one. If a business or individual is unsure about needing a TIN, it's a good idea to consult a tax professional or the appropriate government agency to determine what applies.
Types of Tax Identification Numbers (TINs)
Many countries have their own unique tax identification systems. For example, the U.S. offers several distinct types of TINs, each designed for different taxpayers. Let’s look at some of these U.S.-specific examples below.
Social Security Number (SSN)
An SSN is a nine-digit code the Social Security Administration issues. It applies to U.S. citizens, permanent residents, and certain eligible nonimmigrant workers. SSNs are the most common TIN for everything from employment to filing taxes and accessing government benefits.
Employer Identification Number (EIN)
An EIN, or Federal Employer Identification Number (FEIN), is a nine-digit number the Internal Revenue Service (IRS) issues to businesses. It identifies employers, corporations, partnerships, and other entities for tax purposes.
Individual Taxpayer Identification Number (ITIN)
An ITIN is a tax number the IRS issues for individuals who need a U.S. taxpayer ID but aren’t eligible for an SSN. It mainly targets nonresident and resident aliens, spouses, and dependents.
Adoption Taxpayer Identification Number (ATIN)
An ATIN is a temporary nine-digit number the IRS issues for children in domestic adoptions when the adoptive parents can’t get the child’s SSN yet. This identifier allows adoptive parents to claim the child as a dependent while the adoption process is still underway.
Preparer Tax Identification Number (PTIN)
A PTIN is for anyone paid to prepare or assist with U.S. federal tax returns. This number must be used on tax returns or refund claims tax professionals submit to the IRS.
Each type of TIN plays a specific role in the U.S. tax system, ensuring that individuals and entities are correctly identified and compliant with tax regulations.
TIN vs. EIN in the U.S.
In the U.S., a Tax Identification Number (TIN) and an Employer Identification Number (EIN) are two common figures for tax-related identification and operating a compliant business. Here are the fundamental differences between TIN and EIN.
A TIN is an umbrella term for different types of tax ID numbers, including EINs. Think of it like this: all EINs are TINs, but not all TINs are EINs.
- TINs serve general tax purposes. Depending on the individual or entity's situation, a TIN could be an SSN, ITIN, or EIN. TINs are necessary for filing taxes or claiming certain benefits.
- EINs are specifically for business-related taxes. Businesses operating in the U.S. use EINs to file their business taxes. An EIN is required if a company has employees, operates as a corporation or partnership, or meets specific criteria set by the IRS.
Which one is needed?
- When filing personal taxes, an SSN or ITIN serves as a TIN.
- When running a business, an EIN acts as the business’s TIN.
While a TIN has multiple uses, an EIN is strictly for business activities. When uncertainty arises about which identification number is needed, it is advisable to consult a tax professional or contact the IRS.
How to get a TIN
Acquiring a TIN depends on the specific type of tax ID number required. The process varies for different types of TINs:
For SSNs
Eligible individuals, typically U.S. citizens and permanent residents, should apply through the Social Security Administration. Once obtained, the SSN is used on Form W-2 for W-2 employees.
For ITINs
Those who don’t qualify for an SSN but need a TIN for tax purposes can apply for an ITIN by following these steps:
- Completing Form W-7, the Application for IRS Individual Taxpayer Identification Number
- Submitting the completed Form W-7 with the federal income tax return
- Providing necessary documents to verify identity
- Confirming identity, which may involve participating in a video chat
For EINs
Businesses requiring an EIN can:
- Apply online via the IRS website
- Alternatively, complete IRS Form SS-4 and either fax or mail it to the IRS
Once obtained, the EIN is used on various tax forms, such as Form W-9, when sharing business information with clients or vendors.
Requirements and necessary documents may vary based on individual circumstances. For the most current details, it's recommended to check the IRS website or consult a tax professional to ensure compliance with the correct procedures.
Foreign Tax Credit
The Foreign Tax Credit is relevant for U.S. citizens or resident aliens earning income abroad. This credit helps avoid double taxation by allowing taxpayers to offset their U.S. tax liability with foreign taxes paid or accrued.
To claim this credit, taxpayers must include their TIN on the necessary forms. For most U.S. citizens, this will be their SSN. Resident aliens without an SSN should use their ITIN.
Typically, Form 1116 needs to be completed and included with Form 1040, Form 1040-SR, or Form 1040-NR. The credit primarily applies to income, war profits, and excess profits taxes.
Understanding the Foreign Tax Credit can help individuals manage global tax responsibilities and avoid double taxation on foreign income. Those working or investing internationally should investigate how this credit applies to their specific situation.
FAQs
Tax identification is a crucial matter for businesses and individuals operating in a global context. While TIN systems vary by country, common questions often arise regarding their purpose, acquisition, and usage.
Can you get a TIN online?
Yes, you can obtain certain TINs online. For example, you can apply for an EIN directly on the IRS website. However, for other TINs like SSNs or ITINs, you’ll need to follow specific procedures that might involve visiting an office or mailing in documents.
Is a Tax Identification Number the same as a Social Security Number?
Not exactly. While an SSN is a type of TIN, not all TINs are SSNs. Your TIN could also be an ITIN or an EIN, depending on your situation.
Where do I find my U.S. TIN?
The location of your U.S. TIN depends on which type you have. Your SSN will be on your Social Security card. Your EIN can be found in the confirmation letter you received from the IRS. If you have an ITIN, it will be on the CP565 Notice sent by the IRS. You can also locate your TIN on previous tax returns or other official documents.
Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.
