During fiscal year 2021, the Internal Revenue Service (IRS) processed an estimated 261 million federal tax returns and various types of supplemental documents. As part of the filing processes, tax filers – including individuals and business entities – need to provide tax numbers. Tax numbers are also critical for other tax-related activities beyond filing, such as making necessary payments.
However, the type of tax number a person or company needs to use can vary based on the exact situation they’re in. Here’s a look at what a tax identification number is and the different types of tax numbers a person or business potentially needs to use.
What Is a Tax Identification Number?
A tax identification number is a unique numeric identifier that allows tax-processing entities like the IRS to monitor relevant financial activities and connect filings to specific individuals or businesses. Tax numbers are required because other commonly used identifiers – such as names – aren’t always entirely unique. Every tax identification number is only assigned to one person or company, making it easier to ensure that the correct records and documents are connected to the right individual or business.
Social Security Number
Social Security Numbers (SSNs) are a type of tax identification number assigned to specific individuals, namely U.S. citizens, permanent residents, and specific temporary residents. As the name suggests, the Social Security Administration (SSA) issues and oversees SSNs.
Every SSN issued uses the same numeral format, listed as XXX-XX-XXXX. SSNs are commonly required for obtaining employment, accessing government services, claiming dependents, getting bank accounts, and more.
Individual Taxpayer Identification Number
An individual tax identification number (ITIN) is functionally an SSN alternative for those who are in the U.S. legally but aren’t eligible for an SSN. For example, ITINs are issued to nonresident and resident aliens, along with their spouses and dependents. ITINs use the same format as SSNs and are generally used in place of SSNs during processes that require them.
Employer Identification Number
Employer identification numbers (EINs) are the business equivalent of SSNs. They allow companies to manage specific financial and tax-related responsibilities as separate entities instead of directly connecting them to the business owner or operator. EINs use a slightly different format, listed as XX-XXXXXXX. Any business can request an EIN, and there’s a simple online process that provides an EIN immediately once the applicant submits a complete online application.
Other Types
While the tax identification numbers above are the primary types of tax numbers used by individuals and entities in the United States, they aren’t the only ones. The others are connected to specific use cases, so they aren’t as widely used as the others. Here’s an overview.
Adoption Tax Identification Number
Adoption tax identification numbers are temporary tax numbers assigned by the IRS. They’re only issued when individuals who are adopting a U.S. citizen or resident need to file their taxes before they’re able to get an SSN for the child they’re adopting.
Preparer Tax Identification Number
Preparer tax identification numbers (PTINs) are assigned to paid tax preparers who prepare returns for others. The tax preparer is required to enter their PTIN on returns they fill out on behalf of other individuals, essentially serving as a way to monitor the tax preparation activities of those who engage in that type of business.
