Tax identification number (TIN) definition and meaning
A Tax Identification Number (TIN) is a unique nine-digit number that’s assigned to individuals and businesses by the Internal Revenue Service (IRS) or Social Security Administration (SSA), and they are used to identify taxpayers when they file tax returns, pay taxes, or engage in other tax-related activities. Because they are used for tracking purposes, TINs must be included on all tax returns.
More about TINs and the different types
TINs are a must-have for businesses, and the IRS requires employers to collect and keep up-to-date information on all their employees’ TINs as well. During tax time, TINs are especially important since employers are responsible for using this unique set of nine digits to accurately report wages paid to their employees to Uncle Sam.
TINs have other uses too. For instance, banks, credit unions, and other types of financial institutions can use them for compliance and reporting. TINs come in different shapes and sizes, and we’ll cover some of the more common ones.
Social Security Number (SSN)
Most of your employees are likely familiar with the first TIN on this list: social security numbers, which are issued to individuals. For most people that need one, getting an SSN means filling out an application and sending it to the Social Security Administration. Individuals may choose how to apply: by mail, in person at an SSA office or online. To prevent any hiccups when applying, have documentation of identity, such as a birth certificate or passport, readily available.
Are there fees? Applying for a social security card has no fees.
Employer Identification Number (EIN)
An employer identification number (also referred to as an EIN) is generally used by private companies and non-profit organizations, and its primary purpose is to identify a business entity. The fastest way for a business to get an EIN is to apply online through the Internal Revenue Service (IRS) website.
Having information such as your company name, address, as well as first and last name (plus the social security number of the person) applying saves time. Completing Form SS-4 is another option and then sending it to the IRS by mail or fax.
Are there fees? Just like a social security card, there are no costs associated with getting an EIN and in most cases you can generate one in a few seconds on the IRS website.
Preparer Tax Identification Number (PTIN)
A Preparer Tax Identification Number (PTIN) is a unique identification number assigned by the Internal Revenue Service (IRS) to tax return preparers. All tax return preparers that are paid to prepare, assist in preparing, or review tax returns must have one. Applying online is straightforward and takes less than 20 minutes online. For tax preparers who prefer paperwork, they can use Form W-12 to apply. Paper applications take four to six weeks to be processed.
Are there fees? One thing to note is that the license fee for both new PTINS and renewals cost $30.75.
Taxpayer Identification Number (ITIN)
An ITIN is a tax identification number that is available only to certain nonresident and resident aliens, their spouses, and dependents who are unable to obtain a Social Security Number (SSN). These are 9-digit numbers (beginning with the number “9”), are formatted the same way as SSN. To obtain an ITIN, you’ll need to complete IRS Form W-7, also known as the IRS Application for Individual Taxpayer Identification Number, and provide supporting files which the IRS says must include documentation “substantiating foreign/alien status and true identity for each individual.”
The IRS says you have three options to apply and provide your documentation:
- You may either mail the documentation, along with the Form W-7
- Present the documents at any IRS walk-in office
- Process your application through an Acceptance Agent authorized by the IRS
Are there fees? Currently, there are no fees when applying for (and to receive) an ITIN.
Though each TIN reports tax-related information, keep in mind there is one slight difference in how they are assigned:
- A Social Security number (SSN) is issued by the SSA
- All other TINs on the list above are issued by the IRS
