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?
Nirav Patel said: Thursday, October 15, 2020I am an Indian citizen and my partner is a US citizen. I want to open a partnership company [LLC] in Delaware, USA. Once our company will start in the USA, at that time I have to file my personal tax return in the USA and as I am an Indian citizen, so I have to submit that in India later on. So for that my questions are: 1. How to file tax in the USA without social security number? 2. Do I file K1 with ITIN? 3. What documents of mine are required to get ITIN number? List of my documents for Indian Citizen 4. Is personal bank account of mine mandatory in USA? 5. Is a USA visa required? [If yes, type of Visa] 6. Do I have to visit USA for that? 7. How much time whole process will take? waiting for your reply
HBS Staff replied: Friday, October 16, 2020Nirav, thank you for reaching out. Unfortunately, many of your questions we are not able to answer, as we cannot provide tax advice or provide support for setting up your bank account. What we can tell you is that there is no requirement to have a bank account in the US. You might want to contact a bank to discuss what you'll use the account for to make sure it's the right choice. As far as the ITIN, the information you'll need to provide can be found on IRS form W-7: https://www.irs.gov/pub/irs-pdf/fw7.pdf
Tahir said: Thursday, October 15, 2020For a Non US or never visited US person, please guide me: I want to start an online selling business from my own country, in this case either LLC or Corporation, which is best for business benefits. I heard Mercury bank and Azlo for online banking, which one you recommend as more reliable. Please assist if I can take your service for both these assignments so?
HBS Staff replied: Thursday, October 15, 2020This article will help you compare LLCs and Corporations: https://www.delawareinc.com/corporation/corporation-vs-llc/
As we mentioned, we cannot advise on which is a better option for you, because it depends on your specific objectives and plans for the business. For example, LLCs are often a good choice for simple and flexible management. Corporations are typically preferred by clients who intend to sell equity ownership in their company. We highly recommend that you speak with an attorney if you are unsure which to choose. We are happy to help you create the company once you know which entity type you want.
We do not work directly with the banking platforms and cannot advise on which to choose. It would be best to contact both of them to understand their benefits and requirements for creating an account.
Tahir said: Sunday, October 11, 2020I am a non US resident, nor I have visited US in past. I want to create a company in US without visiting US, to start an online business. Please tell me whether LLC is the best option or the Incorporation Inc. company? Moreover, I don't have any physical address, nor anyone in US whose physical address I can provide in forming a company or business bank account. How I can create my company in such conditions. Please assist in this regard
HBS Staff replied: Wednesday, October 14, 2020As a non-resident, you can still create either an LLC or corporation. The choice depends on your objectives for the business so unfortunately we cannot tell you which is the right choice for you. Most US banks will require you to visit in person in order to open an account. Some of our international clients have had success with Merucy Bank, so you might want to check with them.
Leon Rashed said: Wednesday, July 15, 2020Is the vendor ID the same as the IRS tax ID for a sole proprietorship. Reply
HBS Staff replied: Thursday, July 16, 2020This would depend on the form that you are completing. We can't be sure what Vendor ID is referring to. Sorry we can't be of more assistance.
Mohamad Farchoukh said: Thursday, July 9, 2020Hello, I created a delaware LLC for my online business, and i'm trying to get a payoneer bank card for my company. They are asking me for an ITIN. Since i havent paid any taxes yet, and i'm not a US citizen or living in the US, can I get one? if yes, how?
HBS Staff replied: Thursday, July 9, 2020You can obtain an ITIN Number by completing Form W-7 and mailing it to the IRS. Alternatively, you can contact one of the ITIN acceptance agents (https://www.irs.gov/individuals/international-taxpayers/acceptance-agent-program) listed by the IRS for assistance. There are agents available within the U.S. as well many countries internationally. Additional info here.