What Is a Tax Identification Number (TIN) for U.S. and Foreign Persons?

Introduction

If you pay taxes in the U.S., own a U.S. business, or withhold taxes on behalf of U.S. employees, you will need to understand tax identification numbers.

A TIN, or Tax Identification Number, is issued to taxpayers and used by the Internal Revenue Service (IRS) to track all tax returns. Individuals, corporations, and non-profit organizations must have a TIN to log all their taxation activities legally.

There are multiple different types of TINs. So if you are new to the world of TINs, it can be confusing to know which one you need and how to get it. U.S. citizens and foreign residents need a TIN to earn income in the country. Alternatively, if you are a company that hires employees, each worker must provide you with their TIN.

Want to know more about TINs? This article covers how to get one, which one you need, and when you should use it.

Let’s dive in.

What Exactly Is a Tax Identification Number (TIN)?

A tax identification number, or TIN, is typically a nine-digit number used to legally track the tax returns of individuals and entities in the U.S.

If planning to earn income in the U.S., individuals, and entities must apply for a TIN. You may also need a TIN to take out a bank loan, apply for work, or file taxes with your state agency.

Most TINs are issued directly by the Internal Revenue Service (IRS). There are a couple of exceptions where a TIN is not issued by the IRS, including Social Security numbers and foreign tax ID numbers.

What are the different types of TIN?

• SSN - Social Security Number
• ITIN - Individual Taxpayer Identification Number
• EIN - Employer Identification Number
• ATIN - Taxpayer Identification Number for Pending U.S. Adoptions
• PTIN - Preparer Taxpayer Identification Number

Which Tax Identification Number Do I Need?

Let’s explore the different TINs, the exact purpose of each type, and how to determine which one you need.

What Is the Social Security Number (SSN)?

An SSN is used to track the earnings of U.S. employees, calculate their entitlements to Social Security benefits, and allow them access to social services like retirement or medical. If you are a U.S. citizen born in the country, you will typically receive an SSN at birth. Permanent residents and non-immigrant status residents who are authorized to work by the Department of Homeland Security (DHS) can also get an SSN and should apply for one.

There are three main types of Social Security cards. These are for:

• U.S. citizens and permanent residents
• Temporary workers with non-immigrant status
• Solely for tax purposes

How do you apply for a Social Security number? Fill in the SS-5 form to apply for a Social Security number. Be ready to provide proof of your identity and personal details.

What Is the Individual Taxpayer Identification Number (ITIN)?

An individual taxpayer identification number, or ITIN, is a nine-digit tax number issued by the IRS for specific individuals. It is given to foreign, non-U.S. citizens who need a TIN but are not eligible for a Social Security number.

Those eligible for this foreign tax ID number include the following:

• Certain non-resident and resident aliens
• Their spouses
• Their dependents

If you are eligible for the ITIN, check your eligibility using the IRS Interactive Tax Assistant.

How do you apply for the foreign tax identifying number ITIN? Fill in the W-7 form, where you will need to prove your foreign status and identity.

What Is the Employer Identification Number (EIN)?

The EIN, or employer identification number, is for businesses and entities, including non-profits, in the U.S. It may also be required for estates and trusts if they report earnings using the 1041 form. It is a nine-digit number used to track your business tax returns. You will need one to file taxes, open a business account, or take out a business loan.

How do you know if you need an EIN? You should have an EIN if you:

• Are a business entity with employees
• Are a corporation or partnership
• File employment, excise, alcohol, tobacco, or firearms tax returns
• Withhold taxes on income (other than salary) to non-resident aliens
• Have a Keogh plan
• Are involved with trusts, estates, non-profit organizations, farmers’ cooperatives, real estate mortgage investment conduits, plan administrators

To apply for an EIN, the easiest way is to fill out the online form, where you should provide evidence of your and your business’s identity. Some companies may qualify for tax-exempt status.

What Is the Taxpayer Identification Number for Pending U.S. Adoptions (ATIN)?

The ATIN is a temporary tax number used for anyone who adopts a child who is a U.S. citizen or resident. Like most other TINs, the ATIN is nine digits issued by the IRS.

It is used when the individual is eligible to claim the adoptive child as a dependent but has yet to be able to attain their SSN before submitting their tax return. They will use the ATIN to declare the child’s identity on their federal income tax return to claim them as a dependent or claim child care credits.

You can apply for an ATIN if:

• You are involved in a domestic U.S. adoption or adoption of a child with a permanent resident alien card
• You have reasonably attempted to get the child’s SSN but have been unsuccessful
• The Social Security Administration (SSA) has not been able to provide the SSN yet for any reason
• You are qualified to claim the child as a dependent on your tax return
• The child is already placed in your home by an authorized agency

You can apply for an ATIN using the form W-7A.

What Is the Preparer Taxpayer Identification Number (PTIN)?

The preparer tax identification number (PTIN) is an eight-digit number issued by the IRS. Paid federal tax preparers must legally use a PTIN on every tax return they file. It has been a requirement since 2011 that any tax professionals must include their PTIN on returns.

If you are filing taxes online, including joint returns and returns for friends and family, you may not need a PTIN. Employees preparing a tax return for their company do not need a PTIN as they are not reimbursed for the service. As legal responsibility for tax returns falls with the individual or company employing the tax preparer's services, it is essential to use a trusted preparer.

To apply for a PTIN online, you can visit the online PTIN application. Alternatively, you can fill out form W-12.

TIN Versus EIN

Many people use these two terms interchangeably, but it is crucial to understand the difference. A TIN is the general umbrella term for tax identification numbers, while an EIN is a specific type of TIN, an employer tax number. There are many TIN types, including foreign tax identification numbers.

A tax identification number (TIN) is:

• A general tax ID number
• Includes multiple different types of tax numbers, including SSN, ITIN, EIN, ATIN, and PTIN
• Used to track the tax returns of individuals and companies
• Includes tax numbers for U.S. citizens and tax IDs for foreigners

An employer identification number (EIN) is:

• Specifically for business entities
• Used to track business taxes and tax returns
• Used for businesses with employees
• For estates and non-profit organizations

Federal Government Help Due to the COVID-19 Pandemic

The restrictions and impacts on travel during the COVID-19 outbreak led to the U.S. government temporarily updating several tax laws in exceptional circumstances.

Typically in the U.S., any business, service, or trade activity (USTB - U.S.trade or business) carried out by non-resident aliens in the country may be taxable. However, during specific dates of the pandemic, if individuals or entities (not typically carrying out USTB) carried out business in the country due to the travel restrictions for up to 60 days may not be liable.

The IRS also introduced other tax helps for businesses and individuals affected by the pandemic, including:

• Employer tax credits
• Child tax credits
• Penalty relief
• Economic impact payment

File Taxes With Skuad

Suppose you are a business with U.S. employees. In that case, you must stay up to date with correctly calculating and submitting your business taxes and keeping on top of calculating, withholding, and paying employee tax. Making mistakes with the IRS can lead to severe consequences. If you employ remote workers globally, following each country's tax laws and legislation can be overwhelming.

Skuad is a global employment and payroll platform that takes care of employment taxes for you. With localized knowledge of different countries' laws, Skuad ensures tax compliance all over the world. 

Skuad’s employer of record (EOR) services allow you to legally hire employees in over 160 countries without the organization setting up an entity. Skuad’s platform also automates and manages payroll processes to make calculating and withholding taxes quick, simple, and error-free.  

To know more about Skuad, book a demo today.