Tax id number vs social security number

Introduction

In this video, you will get answers to these questions:

• What is the difference between an EIN, Tax ID, and Social Security Number?
• What is an EIN Number?
• What is a Tax ID Number?
• What is a social security number?
• How does the IRS know there is an audit needed?

Video Transcript

What’s the difference between an EIN, tax ID, and a social security number? That’s the question I’m answering today. I’m Aaron Hall, an attorney for business owners in Minnesota. I was asked this question the other day, and I thought, you know what, that would be a helpful video because there’s a lot of ambiguity around EINs, social security numbers, and the term, tax ID.

Now let’s talk about EIN. It stands for employer identification number. It’s issued by the IRS. The EIN or employer identification number is given to businesses and trusts, regardless of whether they’re actually employers. It’s basically saying, this is the tax number for a business or for a trust. So that’s an EIN. Individuals, we have a tax number, it’s our social security number. That’s given to us when we’re born, and that social security number applies to each individual. Originally, individuals were going to be part of the social security program, but now it’s essentially used as a tax identification number.

And now let’s talk about the term tax ID number or tax identification number. Tax identification number encompasses both an EIN and a social security number. So for example, let’s say you want to open up a bank account, the bank will say, “Please enter your tax ID number here.” Well, if the account is under the name of an individual, you use your social security number. If the account is under the name of a business, like an LLC or a corporation, you’ll use your EIN number for the business. That is how the government keeps track of which accounts are owned by an LLC, a corporation, an individual, et cetera.

Keep in mind then that companies, businesses, financial organizations, will report to the government, in particular, the IRS significant transactions and information about these accounts. That for example is how the IRS may know that an audit is needed. If there has been $100,000 received in an LLCs account, and the bank reports that information to the IRS, under that EIN number, the IRS computer systems will say, “All right, was there a tax return for this EIN number? If no, hey, what are we going to do about that?” And the IRS may take action based on that.

So, tax ID numbers include EINs for businesses and trusts and security numbers for individuals. And it is information that you put on accounts or use to identify the individual or entity that maybe owns an account or owns some other asset.

All right, so there you have it. That explains the difference between an EIN, tax ID number, and social security number. For more information about topics like this, you can see the link to my website at aaronhall.com, which is in the description below. If you find these sorts of videos are helpful and you’re interested in more, you’re welcome to subscribe. And if you have any questions, feel free to add them in the discussion section below. Thanks for joining me here today.

Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)

To file tax forms and claim treaty benefits, the IRS requires a nonresident alien to have either a Social Security Number (“SSN”) or an Individual Taxpayer Identification Number (“ITIN”).

These are not the same as a national ID number. SSNs and ITINs do not represent permission to work and are not proof of U.S. citizenship or Lawful Permanent Residence.

It is important to keep your SSN or ITIN confidential to protect your identity. Tax-related identity theft occurs when someone uses your stolen SSN or ITIN to file a fraudulent tax return in your name and claim a refund. Visit the IRS website to learn more about tax-related identity theft.

Social Security Numbers

A Social Security number (SSN) is a taxpayer identification number issued by the Social Security Administration. Individuals who are employed in the U.S. must have a Social Security number to file an income tax return. Your Social Security number does not expire. If you leave the U.S. and return at a later time, you do not have to reapply.

In order to receive a SSN, you must apply in person at a local office of the Social Security Administration. You will need to complete an application for a Social Security card (Form SS-5) and provide certain documentation proving your immigration status, work eligibility, age, and identity.

Refer to the Social Security Administration website and publication to find more information about applying for a SSN. Follow these links for:

specific information on the SSN process for MIT international students

specific information on the SSN process for MIT international scholars

It can take several weeks from the date of application for the Social Security card to be mailed to you. Please report your Social Security number to VPF HR/Payroll as soon as you receive it, by calling the HR/Payroll team at 617-253-4255.

Related Links:

• Social Security and Medicare Tax (FICA)

Individual Taxpayer ID Number (ITIN)

An Individual Taxpayer ID Number (ITIN) may be required for individuals who do not have employment authorization and are not eligible for an SSN. ITINs are issued only for the purpose of federal tax reporting. Nonresidents filing an income tax return (e.g. 1040NR, 1040NR-EZ) may need an ITIN.

An ITIN is not required to complete a Form 8843.

An ITIN does not entitle the recipient to Social Security benefits, indicate immigration status, or guarantee/certify the right to work in the U.S.

In order to receive an ITIN you must complete Form W-7 (Application for IRS Individual Taxpayer Identification Number) with the IRS. Visit the IRS website to learn more about ITINs.

The tax preparation software (Sprintax) provided for international scholars will automatically generate Form W-7 for nonresident aliens who require ITINs for their dependents in order to claim them on their tax returns.

Once you have completed the documents, you can make an appointment at the IRS Taxpayer Assistance Center to submit your application along with your proof of identity and foreign status documents.

The content in this website is provided for informational purposes only. MIT does not offer legal, accounting, or tax advice and services. This information should not be used as a substitute for consultation with a professional accounting, tax, or legal advisor. MIT recommends that students consult a tax advisor for individual tax advice.