Different identification numbers should be known when dealing with the complicated system of U.S. taxes. Two terms that are misguided by the greater majority are the Taxpayer Identification Number and the Individual Taxpayer Identification Number.
Accordingly, taxpayers, either as individuals or businesses, have to be fully aware of the differences between these two numbers and their applications.
This article will explain what a TIN and an ITIN are, why they are required, how to get them, and their purposes.
What is TIN?
A Taxpayer Identification Number refers to the generic term that means a series of identification numbers used by the Internal Revenue Service in administering tax laws.
Every taxpayer, including all those who file taxes or any other financial paperwork with the Internal Revenue Service, needs to have a TIN.
It may be a Social Security Number, Employer Identification Number, or an Individual Taxpayer Identification Number.
What is an ITIN?
A special kind of TIN assigned by the Internal Revenue Service is known as the Individual Taxpayer Identification Number. It is a nine-digit number whose formatting is similar to that of the SSN: XXX-XX-XXXX, but always beginning with a 9.
ITIN is for people who are exempt from having a Social Security Number but who nevertheless have to file or report income for taxation.
It is primarily used by nonresident aliens, resident aliens, their spouses, and dependents who do not have and are not eligible to obtain an SSN.
What is the ITIN number used for?
The ITIN has numerous applications, which are mainly related to tax reporting and compliance. It provides a route for those people who do not have an SSN to file returns and comply with tax obligations.
It is through this that many people can report United States-earned income and the necessary payment of taxes.
Where Can I Use my ITIN Number?
You are allowed to utilize your ITIN in the following instances:
- The ITIN is only renowned for processing federal income tax returns.
- Opening a Bank Account: Some banks will still utilize it to open personal accounts.
- Securing a Loan: A few may be able to apply for credit using an ITIN, such as mortgages or personal loans.
- Educational Purposes: ITINs can be used to apply for scholarships and financial aid for higher education.
- Employment: While an ITIN itself is not an employment authorization document, some international students and scholars apply for an ITIN for internship purposes or other income-reporting requirements.
How to get TIN number?
Getting a TIN depends on the type you are going to acquire:
- SSN: If you are a United States Citizen or Lawful Permanent Resident, you are eligible for an SSN through the Social Security Administration.
- An EIN is sought-after for any business, whether it is a proprietorship, partnership, corporation, or a non-profit business. Applications are processed online through the IRS website or by mailing in an application.
- ITIN: Submits an application on Form W-7, Application for IRS Individual Taxpayer Identification Number. The form along with the documentation that supports identity and foreign status, should be submitted to the IRS. It can be mailed or accepted by IRS walk-in offices, and through Acceptance Agents.
Type of TIN
The IRS uses the following type of TINs:
Different types of TINs include the following: Social Security Number SSN—Used by U.S. citizens and lawful permanent residents. Employer Identification Number EIN—Used by businesses, estates, trusts, and other entities.
Individual Taxpayer Identification Number ITIN—Used by individuals who are not eligible for an SSN. Adoption Taxpayer Identification Number ATIN—Temporarily assigned to children in the process of being adopted who cannot get an SSN.
Why do you need TIN number?
A TIN is needed for many purposes:
- Tax Filing: Filing your tax returns requires a TIN.
- Financial Transactions: You have to show a TIN in bank account opening or any other financial transactions like applying for loans.
- Government Benefits: Some of the government benefits and services require a TIN.
- Compliance: The availability of a TIN keeps a person in compliance with U.S. tax laws and therefore saves him from penalties and other legal issues.
Conclusion
Any person who has dealings with the U.S. Taxman needs to be well versed on the differences and purposes of both TIN and ITIN.
While both are used to identify a taxpayer, an ITIN is a numbered identifier issued especially for people who cannot get an SSN.
Whether for tax submission, bank opening, or loan applications, knowing the correct identification number may be the main difference.
With the assurance of having a correct TIN, he will be able to comply with tax laws and avoid penalties, and financial transactions will flow through seamlessly.
For further assistance with ITIN applications, check out our ITIN page.Visit: The IRS Website is irs.gov.