Gokce Tandogdu
ITIN Specialist, itin.net
The fundamental difference between an ITIN and an EIN lies in their purpose: an ITIN identifies individual U.S. taxpayers who lack a Social Security Number (SSN), while an EIN identifies businesses and other entities for U.S. tax purposes. Understanding what is the difference between itin and ein is crucial for anyone engaging in financial or business activities in the United States.
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) to individuals who are required to have a U.S. taxpayer identification number but do not have, and are not eligible to obtain, a Social Security Number (SSN). ITINs are issued regardless of immigration status. They are strictly for federal tax purposes and do not authorize employment in the U.S., provide eligibility for Social Security benefits, or qualify the holder for Earned Income Tax Credit (EITC) benefits.
Who Needs an ITIN?
Non-residents who need to file a U.S. tax return but do not have an SSN are the primary recipients of ITINs. This includes:
- Non-resident aliens who need to file a U.S. tax return (e.g., Form 1040-NR).
- U.S. resident aliens who are not eligible for an SSN.
- Dependents or spouse of a U.S. citizen or resident alien who are not eligible for an SSN.
- Dependents or spouse of a non-resident alien U.S. visa holder who are not eligible for an SSN.
An ITIN is also required if you need to claim tax treaty benefits or are selling U.S. real property and must file a tax return.
How to Get an ITIN
You apply for an ITIN by completing Form W-7, Application for IRS Individual Taxpayer Identification Number. You must submit the form along with original identification documents or certified copies from the issuing agency, and a federal tax return. The IRS will review your application and, if approved, will mail you your ITIN. Processing can take several weeks, especially during peak tax season.
Alternatively, you can apply through a Certified Acceptance Agent (CAA), such as itin.net. CAAs are authorized by the IRS to help you apply for an ITIN and can verify your original identification documents, returning them to you on the same day. This bypasses the need to mail sensitive documents to the IRS. The process through a CAA is generally faster.
What is an EIN?
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number (TIN), is a nine-digit number assigned by the IRS to business entities operating in the United States for identification purposes. It is essentially a Social Security Number for businesses. Any business that operates as a corporation or a partnership, or that has employees, must have an EIN. It is also required for certain other business structures and for specific tax filings.
Who Needs an EIN?
An EIN is required for a variety of business entities and situations, including:
- Corporations and Partnerships: Any business structured as a corporation or partnership needs an EIN.
- Limited Liability Companies (LLCs): If an LLC has more than one member (a multi-member LLC) or if it elects to be taxed as a corporation, it needs an EIN. Single-member LLCs generally do not need an EIN unless they have employees or file excise tax returns. However, many banks require an EIN for an LLC to open a business bank account, even for single-member LLCs.
- Businesses with Employees: If your business hires employees, you must have an EIN to report employment taxes.
- Certain Non-Profit Organizations: Charitable organizations, private foundations, and trusts typically require an EIN.
- Businesses Engaged in Specific Activities: This includes businesses that file excise tax returns, alcohol, tobacco, and firearms returns, or that have Keogh plans.
- Opening a U.S. bank account: Many U.S. financial institutions require an EIN for a business entity to open a business bank account, even if not strictly required by the IRS for tax filing purposes. This is particularly true for entities like a U.S. LLC.
How to Get an EIN
The primary method to obtain an EIN is by applying directly with the IRS using Form SS-4, Application for Employer Identification Number. The IRS provides several ways to file Form SS-4:
- Online: This is the fastest method. You can apply for an EIN on the IRS website if you have a valid U.S. address. The EIN is assigned immediately upon successful completion of the application.
- By Mail: You can mail your completed Form SS-4 to the IRS. Processing can take several weeks.
- By Fax: You can fax your completed Form SS-4 to the IRS. This is generally faster than mail but slower than the online method.
- By Phone: International applicants who do not have a U.S. address can apply by phone. You will need to call the IRS toll-free number and speak with an IRS representative.
If you are forming a U.S. LLC or other business entity, obtaining an EIN is a critical step. The EIN is used for all federal tax filings related to your business, including income tax, employment tax, and excise tax returns. The IRS issues a confirmation letter, CP-575, once an EIN is assigned.
Key Differences Summarized
To directly address what is the difference between itin and ein, consider these points:
| Feature | ITIN (Individual Taxpayer Identification Number) | EIN (Employer Identification Number) |
|---|---|---|
| Purpose | Individual U.S. tax processing | Business and entity U.S. tax identification |
| Issued To | Individuals without an SSN | Businesses, corporations, partnerships, LLCs, estates, trusts |
| Associated Forms | Form W-7 | Form SS-4 |
| Tax Filing | Personal federal income tax returns | Business federal tax returns (income, employment, excise) |
| Employment Status | Does NOT authorize employment | Not directly related to individual employment status |
| Business Activity | Generally not used for business | Essential for most business operations |
| Application Process | Mail Form W-7 with tax return & ID docs | Apply online, mail, or fax Form SS-4 |
| Issuing Agency | IRS | IRS |
| Confirmation Doc | Notice CP-565 | Notice CP-575 |
When You Might Need Both
It is common for individuals to need both an ITIN and an EIN, particularly if they are non-residents starting a business in the U.S. For example, a foreign national might need an ITIN to file their personal U.S. tax return while simultaneously needing an EIN for their U.S. LLC to conduct business operations, hire employees, or open a U.S. bank account. The EIN is used for the business's tax obligations, and the ITIN is for the individual's tax obligations.
For instance, if you are a non-resident alien forming an LLC in the U.S., you would first typically form the LLC (which may require a registered agent). Then, you would apply for an EIN for the LLC using Form SS-4. The EIN is necessary for the LLC to file its own tax returns, such as Form 5472 if it's a foreign-owned disregarded entity or a foreign corporation, and to open a business bank account. If you, as the individual owner, have U.S. source income that requires a personal tax filing and you do not have an SSN, you would also apply for an ITIN using Form W-7. This scenario highlights how both numbers serve distinct but sometimes complementary roles.
ITIN vs. EIN for Banking and Business
When establishing a presence in the U.S. for business purposes, both an ITIN and an EIN play vital roles, though they are distinct. An EIN is almost universally required to open a business bank account for an entity like a U.S. LLC. Without an EIN, opening accounts with financial institutions such as Mercury, Relay, or Brex can be difficult or impossible. The EIN signifies the legitimacy and tax identity of the business entity itself.
On the other hand, an ITIN is for the individual. While it does not directly facilitate business banking, it is essential for the individual owner to meet their personal U.S. tax obligations. If the business generates income that is passed through to the individual owner, or if the owner has other U.S. income, the ITIN is necessary for reporting this on their personal tax return. Therefore, while the EIN is for the business entity's financial and tax infrastructure, the ITIN is for the individual's personal tax compliance.
Common Misconceptions
One common misconception is that an ITIN can be used in place of an EIN for business purposes, or vice versa. This is incorrect. An ITIN is strictly for individual tax reporting and has no bearing on business tax identification. An EIN is strictly for business entities and cannot be used by an individual for personal tax filing purposes.
Another misunderstanding relates to employment. An ITIN does not grant work authorization. While an EIN is associated with businesses that may hire employees, it does not grant an individual the right to work in the U.S. Individuals needing to work in the U.S. must have an SSN or appropriate work visa.
Finally, some individuals believe that if they have an EIN, they do not need an ITIN, or vice versa. This is only true if their activities are exclusively business or exclusively individual tax-related without an SSN. As shown in the scenario of a non-resident starting a U.S. business, needing both is very common.
Processing Times and Updates
Processing times for both ITINs and EINs can vary. For EINs, online applications are typically processed immediately. Mail or fax applications can take several weeks. For ITINs, the IRS processing times can fluctuate significantly based on the volume of applications received. During peak tax season (late winter and spring), it can take 10–11 weeks or even longer to receive an ITIN. Applying through a CAA can significantly expedite the process of document verification, though the IRS still needs to issue the ITIN itself.
It is important to note that ITINs expire if not used on a federal tax return for three consecutive tax years. Expired ITINs must be renewed by filing Form W-7 again. The IRS may also send notices, such as CP-48, if there are issues with your tax return or ITIN application.
Seeking Professional Assistance
Navigating the U.S. tax system as a non-resident can be complex. Understanding the distinct requirements for individual (ITIN) and business (EIN) identification is the first step. For individuals who need an ITIN, working with a Certified Acceptance Agent through services like itin.net can simplify the application process by verifying identification documents directly. This avoids the risk of mailing original documents to the IRS.
For business setup, including obtaining an EIN and forming a U.S. LLC, seeking advice from a qualified tax professional or attorney is highly recommended. They can guide you through the formation process, ensure compliance with all federal and state regulations, and advise on the appropriate tax filings, such as Form 5472. If you have specific questions about your individual tax situation or eligibility for certain tax benefits, consulting with a tax professional or referring to IRS publications is advisable. For more insights into U.S. tax obligations, you can explore our resources at /qa or learn more about our founder, Gokce Tandogdu, an ITIN Specialist, at /about.