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

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When starting a new business, your decision to register an LLC or corporation is just the first step. To get up and running, there are several more steps to take, such as getting an EIN number for your business. While the process of obtaining an EIN number from the IRS is not complicated, business owners often have questions about what an EIN is and how it differs from other types of Tax ID Numbers.

So, what is an EIN? In this article, we cover what an EIN number is, why your business needs one, and the steps you need to take to obtain one.

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.

What Do I Do With My EIN Number?

Your EIN Number is the only Tax ID Number your business will need. Your company’s EIN is required to open a bank account. This unique 9-Digit number will be used in many essential business and financial activities for your business. For tax filings and compliance, the primary purpose of an EIN is for federal tax reporting. It is required for all business structures. Historically a single member LLC could get by without an EIN, by using the owner’s SSN, but banking regulators started fining banks for every LLC account set up without a separate EIN from its owners. It is important to note the EIN is not to be obtained until after the business has been formed, not prior to formation. The EIN is crucial for separating your personal and business finances, to avoid commingling your personal assets and business assets. Using an EIN for business purposes can help protect your personal Social Security Number from potential identity theft.

Do I Need to Renew My EIN Number?

You do not need to renew your EIN number once it is assigned. Your EIN number will not expire, but it can go dormant for inactivity and be recycled by the IRS. Usually an EIN will remain with the business for its entire existence. There are certain circumstances where you may need to apply for a new EIN number, for example in a conversion or reorganization to a different entity type, but you will never have to “renew” your EIN number as long as your business operates and reports its taxes.