Tax ID vs. EIN: What’s the Difference?

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Incorporating your company is an exciting process, but the work isn’t done after you form an LLC or Corporation. After that, there are several more steps to take, like getting a tax ID number for your business. The process of getting a tax ID isn’t complicated, but there is often some confusion about what, exactly, a tax ID is and how it differs from an EIN. Is a taxpayer ID the same an an EIN? Here’s what you need to know.

What Is A Tax ID?

A tax identification number (tax ID) is a nine-digit number issued for your business by the IRS. Think of a tax ID as a social security number for your business. Your tax ID number is often used for identification, and the IRS uses this number to administer tax laws.

What Is An EIN?

EIN stands for Employer Identification Number. While there can be some confusion about the difference between a tax ID number and an EIN, they’re actually different names used to describe the same thing.

What Is A TIN?

TIN stands for Taxpayer Identification Number, issued by the Internal Revenue Service (IRS). For noncitizens and non-permanent residents of the U.S. who are often overseas, there may arise a need for the equivalent of a SSN without the associated federal benefits. For example, those people living overseas may need to file certain documents with the U.S. Government. While many of them may do so by obtaining an Employer Identification Number “EIN” for their business, others who do not require an EIN can simply obtain an Individual Taxpayer Identification Number “ITIN”.

Taxpayer ID vs. EIN

Again, a tax ID is an EIN. The terms are often used interchangeably, although the different terms can cause confusion.

Is A Taxpayer ID The Same As An EIN?

Yes, a taxpayer ID is the same as an EIN. However, the EIN is a taxpayer ID for a company and will often be found on business forms.

What Is A Tax ID or EIN Used For?

An EIN is required to withhold taxes from your employees and to open a business bank account. You will also be asked to supply your tax ID number when you fill out any application that requires your business to validate its authenticity.

How Do I Apply For An EIN?

When you incorporate your business, a registered agent like IncNow can often secure an EIN for your Delaware LLC after the Certificate of Formation is approved by the Secretary of State.

To obtain the number, you can fill out a simple online form at IRS.gov/EIN or ask an incorporation service to assist you. You will need to have a signed and completed IRS Form SS4. Should you want help getting the EIN, you can name a third party designee on the IRS Form SS4.

Should you have a social security number, the IRS will often provide the EIN right away online to you or the third party designee. Without a SSN, the IRS will ask that a Form SS4 be faxed in to their office. Faxing in the information is a slower process. When faxed in, the EIN usually takes 3-5 weeks for the IRS to assign. In around that same amount of time, two to five weeks, you will also receive a hard copy of your tax ID from the IRS in the mail.

How Long Does It Take To Get A Taxpayer ID?

The Taxpayer ID is also known as an Employer Identification Number (EIN). IncNow’s EIN service typically takes one business day.

It is a longer process for non-U.S. citizens. For non-U.S.-citizens applying for an EIN for their new business, the IRS requires the SS4 to be faxed in and the IRS assigns with the Taxpayer ID in 4 to 6 weeks.

Most U.S. citizens can obtain up to one Taxpayer ID per day using the IRS online EIN wizard. IncNow offers a service to assist new business owners with the IRS Form SS4 to obtain a Taxpayer ID whether or not they are a U.S. citizen.

How Is A Tax ID Number and EIN Different From An ITIN?

An individual taxpayer identification number (ITIN) is a tax number given to some non-U.S. residents and resident aliens, as well as their spouses and dependents, who are not able to obtain a social security number. If you plan to incorporate in Delaware and you do not have a social security number, you should not need to obtain an ITIN. The Form SS4 does not require an ITIN to obtain an EIN.

Can You Use Your EIN For Multiple Companies?

No, you cannot. Since an EIN is a tax ID number that the IRS assigns to a company, each company must apply for its own unique EIN. Regardless if the company has the same owner, different types of entities are going to be taxed differently and require separate EINs.

One exception to the rule is a Series LLC. Technically, a Series LLC only requires a single EIN regardless of the number of protected series it has. Additionally, when a corporation or LLC has fully owned subsidiaries that single member LLCs, the “children” are known as disregarded entities for tax purposes and have the option to either obtain separate EIN numbers or use their parent entity’s EIN.

Do I Need a Tax ID?

An Employer Identification Number (EIN), also called a tax identification number or tax ID, is required for all business entities that want to open a bank account. It is also required for any multi-member LLC or corporation that has income or expenses that need to be reported to the IRS. An EIN is a nine-digit number used by the Internal Revenue Service (IRS) to identify a business and track their income. It is also a unique identifier, like a person’s social security number. Many business owners discover they need an EIN to have employees or plan to open a bank account. While sole proprietorships are not required to obtain an EIN, it is good practice for separating personal and business assets. Banks also require a separate EIN even for a single member llc under federal banking laws.

When Will I Use a Tax ID?

Tax ID’s are most commonly used for companies hiring employees, opening bank accounts for a business, and protecting the identity of your Social Security Number (SSN) if you are operating as a single member of an LLC. EINs are also required when handling Estates or Trusts, where someone dies and their Estate or Trust becomes a new taxpayer. The social security number of the person is not used after death, except for the final IRS Form 1040 Individual Income Tax Return. The Estate and Trust income after death is reported on an IRS Form 1041 Fiduciary Income Tax Return. For foreign business owners and foreign entities, EIN numbers are required by the Internal Revenue Service.