EIN vs ITIN: What's the Difference?
Two of the most commonly confused identification numbers for new business owners are the ITIN and the EIN. While they may sound similar and are both issued by the Internal Revenue Service, they serve very different roles in the U.S. tax system.
Are an ITIN and an EIN the same?
The short answer is no. They serve different purposes and apply to different levels of tax reporting. One is tied to an individual, while the other is tied to a business. Having one does not replace or eliminate the need for the other, and it is common for a business owner, especially a non U.S. resident, to need both.
Let’s break down the difference between these two numbers.
What is an EIN?
An Employer Identification Number, or EIN, also called a Federal Tax ID Number, is a unique nine digit number assigned by the IRS to identify a business for federal tax purposes. You can think of it as the Social Security number for a business.
An EIN is generally needed to open a U.S. business bank account, hire employees, file certain federal tax returns, and operate your business in the United States.
Technically, not every business is required to obtain an EIN. However, it is typically required for corporations, partnerships, LLCs with more than one member, and any business that hires employees.
What is an ITIN?
An Individual Taxpayer Identification Number, or ITIN, is a tax processing number issued by the IRS to individuals who have a U.S. tax filing or reporting requirement but are not eligible to obtain a Social Security number.
ITINs always begin with a “9” and are formatted similarly to a Social Security number. They are used strictly for federal tax reporting purposes.
ITINs are generally issued to certain non U.S. residents, resident aliens, and in some cases their spouses or dependents, who must file a U.S. tax return or be listed on one. ITINs are issued regardless of immigration status, as both resident and nonresident aliens may have a U.S. tax reporting obligation under the Internal Revenue Code.
Forming a Delaware corporation or LLC as a non resident is perfectly acceptable. However, if there is a U.S. tax filing requirement at the individual level, an ITIN is typically needed in order to complete that filing.
For example, if a company has U.S. source income and profits or losses that flow through to the member or shareholder, the individual owner may need to obtain an ITIN in order to satisfy personal U.S. tax reporting requirements. Whether an ITIN is required depends on the specific tax situation and structure of the business.
Which Do I Need?
Whether you need an EIN or an ITIN depends on who you are and what role you play in the U.S. tax system.
You generally need an EIN if:
- You are forming or operating a business entity in the United States
- Your business is an LLC, partnership, or corporation
- You plan to hire employees
- You need to open a U.S. business bank account
- Your business must file certain federal tax returns
You may need an ITIN if:
- You are an individual who must file a U.S. tax return
- You are not eligible for a Social Security number
- You earn U.S. source income or have other U.S. tax reporting obligations
Remember, an EIN identifies a business entity. An ITIN identifies you personally for tax reporting purposes. An ITIN does not represent a business and does not authorize employment in the United States.
EIN vs ITIN for Non U.S. Residents
You can, and often do, have both an EIN and an ITIN if you are a foreign individual operating a business in the United States. While they are both identification numbers issued by the IRS, they serve entirely different purposes.
For example, if you form a Delaware LLC as a non resident, the company will generally need an EIN to function. If that LLC generates income that must be reported on a personal U.S. tax return, you may need an ITIN to complete that filing.
Similarly, if your U.S. business hires employees, the company is generally required to obtain an EIN for payroll reporting purposes, while you would still use your ITIN, if applicable, for your personal tax filings.
Filing obligations can vary depending on the structure of the entity and the nature of the income, so it is important to review your specific situation with a qualified tax professional.
How to Apply
Both the EIN and the ITIN are issued by the IRS.
To apply for an EIN, you can generally apply online through the IRS website, by fax, or by mail using Form SS 4.
To obtain an ITIN, you must complete Form W 7 and submit it to the IRS along with required documentation verifying identity and foreign status. In most cases, the ITIN application is submitted with a federal tax return, unless an exception applies. The IRS also authorizes ITIN Acceptance Agents, both in the United States and internationally, to assist with the application process.
Final Thoughts
Although an EIN and an ITIN may sound similar, they serve very different roles in the U.S. tax system.
An EIN identifies your business.
An ITIN identifies you as an individual for tax reporting purposes.
Understanding the difference can help you plan properly when forming and operating a U.S. company.
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*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There are 19 comments left for EIN vs ITIN: What's the Difference?
Abdullah Rasheed Khan said: Sunday, October 17, 2021Hi Thanks for this informative article. Can you please help me to understand. If I open an LLC company in DELWARE as a foreigner. Do i have to obtain an ITIN also ? I have a Single Member LLC. If I use any payment gateway on my company like Stripe or paypal, Do they ask me ITIN number also ? Or only EIN number is enough ? Please advise.
HBS Staff replied: Monday, October 18, 2021Hi Abdullah, While we can help form your Delaware LLC, we cannot provide tax or accounting advice to the operational side of your business. It would be best to contact an accountant or tax attorney for your next steps after forming your LLC.
Sabrina said: Thursday, June 24, 2021Although I'm a single member LLC, the banks insist on me having an EIN in order to open a business bank account. Any suggestions? Secondly, I've been wondering what's the point of having a LLC if I have to use my personal SSN?
HBS Staff replied: Thursday, June 24, 2021Hi Sabrina, banks often require EINs to identify your business without using your personal SSN. This way, if someone asks you for your company identifier, you are not supplying your SSN to anyone who inquires. The LLC protects you from personal liability.
best college paper writing service said: Monday, January 25, 2021Nice post. I learn something new and challenging on blogs I stumbleupon on a daily basis. It's always useful to read contet from other writers and use something from other sites.
HBS Staff replied: Friday, January 29, 2021Glad to hear you learn something new and found our article to be informative.
MOHAMME ZAYED said: Thursday, December 31, 2020Hello, I am outside the United States and have not visited before. All I want is trying to understand how to open a Delaware LLC. My goals are not to resell in the United States. I did not understand what I should have in this regard. Do I need To ITIN or EIN
HBS Staff replied: Tuesday, January 5, 2021You do not have to live in, or even visit, the state of Delaware in order to form a Delaware company. Other than residents of restricted countries (Cuba, Iran, North Korea and Syria), anyone can form a Delaware company and operate lawful business activities from anywhere in the world.
A SSN or ITIN is not a requirement to form the company with Delaware or to obtain the EIN from the IRS. This will explain in detail https://www.delawareinc.com/before-forming-your-company/delaware-company-formations-for-non-residents/
Eddy said: Tuesday, December 22, 2020I am not a USA citizen, so I report or filled taxes using an ITIN #. I want to start a SMLLC, I know I can get an EIN # since I have ITIN #. My question is how do I filled taxes for the EIN? whiting my personal taxes? Or do I filled it separately? Please help
HBS Staff replied: Monday, December 28, 2020Unfortunately we cannot advise you on how to file your taxes. It is possible to file for your LLC on your personal returns, but we recommend you speak with an accountant to determine the best strategy for your specific situation.