For individual taxpayers, their Social Security number is their taxpayer identification number unless they applied for a separate number for their business, known as an employer identification number. The Internal Revenue Service does not require all businesses to register for a tax ID, but having a separate number for your business is often a good idea for many, and they are free to obtain. It can help keep your Social Security number private and more cleanly separate you identity from your business's identity. Some organizations will only do business with companies with an EIN.
For most individual taxpayers, your main tax ID is your Social Security number, but businesses often have separate employer identification numbers. Some people ineligible for Social Security numbers have numbers called Individual Taxpayer Identification Numbers, and states can issue their own tax IDs.
Multiple Taxpayer Identification Number Options
The IRS uses various types of tax ID numbers to differentiate among taxpayers. Citizens of the United States receive a Social Security Number (SSN) shortly after birth or after receiving citizenship. Business owners apply for federal tax identification numbers, also known as Employer Identification Numbers (EIN), when the business is a separate tax entity from the owner. As the name suggests, businesses must have an EIN before hiring employees, and even some businesses that don't have employees may wish to obtain one. The Individual Taxpayer Identification Number (ITIN) is for people who do not meet the requirements for a SSN, often including immigrants.
Identification Number for Tax Filings
You cannot file your tax returns without a number that identifies you or your business to the IRS. Whether you use your SSN or another identifier, you include the number on your tax filings and any checks you send to the IRS. Many sole proprietors can use their SSNs rather than EINs and still file a Schedule C with their Form 1040.
If you have employees or file excise or pension tax returns, you must apply for an EIN. If you are filling out a business form, use your EIN if you have one. It's often a good idea to get an EIN to keep your business records separate from your personal ones even if you don't technically need one. It can also help to limit the number of places you must send your SSN for security's sake. Some companies looking to work with independent contractors will require or prefer dealing with businesses with established EINs to help confirm that they're not legally employees for tax purposes.
Otherwise, use your SSN or ITIN, whichever applies to your situation.
Other Tax ID Number Uses
Besides the IRS, many businesses also use your number for identification purposes. As an individual, your SSN is tied to your credit reports, school transcripts and employer's files. Businesses use their EIN when opening accounts with other businesses and when reporting wages to their employees.
For some, it is tempting to use an EIN instead of a SSN when applying for credit if they have a bad credit report. The Federal Trade Commission calls this practice "file segregation" and warns that it is illegal. If you apply for personal credit, you must use your SSN.
Applying for Your EIN
You can apply for an EIN online by visiting the IRS website. Additionally, you can apply over the phone by calling 800-829-4933. If you apply by FAX or mail, you must send in a Form SS-4. Online or phone applicants receive an EIN immediately. Faxed applications take four business days, and mailed applications take up to four weeks. EINs are free when ordered from the IRS.
Specializing in business and finance, Lee Nichols began writing in 2002. Nichols holds a Bachelor of Arts in Web and Graphic Design and a Bachelor of Science in Business Administration from the University of Mississippi.