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?
Andreina said: Tuesday, September 25, 2018This is more of a question? I have an ITIN number already... I need to know if I'm able to use it to apply for an apartment or maybe purchase a car... Or is it only for taxes? And if I'm not working.. how do I go about filing.. or may the pertim staying with use it on there taxes? So many more questions not enough time.. would love your help and advice...
HBS Staff replied: Thursday, September 27, 2018We can't provide advice on how to use your ITIN except that any vendor or agent requesting a tax ID will be able to tell you if the ITIN is sufficient or if they need a personal Tax ID. We encourage you to check with a tax professional if you have specific questions about where you can use your ITIN.
Katia said: Saturday, May 26, 2018Hi!! If i want to form a new LLC, and im not a US resident. Do I need to Get an ITIN number to start the LLC? I mean the ITIN Is required before or as a part of the files needed to obtain the EIN and Open a business Bank acount? And, do you could help us un the end-to-end process to start a new LLC? Do You have spanish support? Thanks
HBS Staff replied: Tuesday, May 29, 2018We can best answer those questions for you if you call 1-800-345-2677 during business hours 9-5 EST. Ask to speak to Alex Oliveras, as he speaks Spanish.
Amaia said: Friday, March 9, 2018Hello, My friend has an ITIN number only. For tax purposes he needs to know is his ITIN has to go on the SSN field or on the FEIN field? I have been asking for everywhere, but no answer. Even the IRS info does not address this issue. Maybe you know...I hope! Thank you.
HBS Staff replied: Monday, March 12, 2018Which form are you referring to? It is unclear in your question.
Emmanuel Darkadakis said: Tuesday, January 17, 2017Hi All, I think about forming an LLC in Delaware to operate as a holding company for one or more businesses located & working in EU- no transactions in USA or with USA-based firms some have EU affiliates however. My questions are: a do I need an ITIN or EIN there will be no operations in USA of any kind?, b can you assist in opening a bank account in USA or UAE? c will I have to pay taxes for the LLC or myself in the US?
HBS Staff replied: Wednesday, January 18, 2017We would be happy to assist you in the forming of a Delaware LLC. A company is often only required to get an EIN if the company is operating lawful business activities in the U.S., opening a U.S. bank account or hiring U.S. citizens for employment. Every bank and banker is different as far as what they require to open a bank account.
At this time, we cannot assist you with opening a bank account. If you’re looking to open a U.S. bank account, the bank will require you to go into the bank in person, with a copy of your company's Certificate of Formation and Federal Tax ID Number (EIN). Generally, a Non U.S. citizen with a non U.S. source of income does not pay federal income tax.