What Is a Tax ID Number?

A tax ID number is a unique nine-digit number that represents people and other entities to the Internal Revenue Services (IRS). The IRS as well as state revenue departments use tax ID numbers to identify people and other entities. To help you understand this concept, this guide looks at the different types of tax ID numbers and explains how they are used.

Why Do Tax Agencies Use Tax ID Numbers?

Tax agencies use tax ID numbers to ensure that they are dealing with the correct entity. For example, there are hundreds or even thousands of people with names such as John Smith, Mohammed Kahn, and Jenny Wong. If people with common names used their names on tax forms, the government would not be able to accurately identify them even if it used other identifiers such as their address or place of birth.

In contrast, all of these people have a unique tax ID number. When they put that number on a form, the tax agency knows exactly who has filed the form. If a third party such as an employer files a tax form with the person’s nine-digit tax ID on it, the government can also tell exactly whom the form has been submitted on behalf of.

What Are the Types of Tax ID Numbers?

Tax ID numbers are not just used by people. Businesses, estates, trusts, and other entities also use these numbers. Here are the main types of tax ID numbers and a brief overview of who or what uses them:

• Social Security Numbers (SSN) — Used by U.S. citizens and foreign residents.
• Employer Identification Number (EIN) — Used by employers such as sole proprietorships, partnerships, and corporations, but also used by trusts and estates.
• Individual Taxpayer Identification Number (ITIN) — Used by people who need a tax ID number but who don’t qualify for a Social Security Number. For instance, if you are a foreign national who does not reside in the United States, you may need to file a tax return if you have U.S. sourced income. To do so, you will need an ITIN.
• Taxpayer Identification Number for Pending U.S. Adoptions (ATIN) — Used by infants and children who are being adopted from other countries. Eventually, these people get their own Social Security Numbers.
• Preparer Taxpayer Identification Number (PTIN) — Used by people who prepare taxes professionally so that the IRS can track who completed and filed the forms for another taxpayer.

Although all of these tax ID numbers are used by different types of entities, they have one thing in common. They are always completely unique. If you have a tax ID, no one else will have that same tax ID.

How Long Are Tax IDs?

Each of these five tax ID numbers has nine characters. An SSN, EIN, ITIN, and ATIN each have nine numbers. A PTIN, in contrast, has the letter “P” followed by nine numbers. They are written differently though.

What Is the Format of a Tax ID Number?

Traditionally, SSNs, ITINs, and ATINs are as follows: XXX-XX-XXXX. EINs appear as so: XX-XXXXXXX. Finally, PTINs look like this: PXXXXXXXX. When you enter these numbers on forms or other documents, you should expect to use these formats.

How Do You Obtain a Tax ID Number?

There are different ways to obtain a tax ID number. The process varies based on the situation. For instance, when someone gives birth to a baby in the United States, the hospital often helps with the paperwork and sends the request for a Social Security Number to the Social Security Administration.

If someone immigrates to the United States, they will obtain their tax ID number as they work through the immigration process, and if someone is adopting a baby from another country, they will also obtain the tax ID as they work through that process.

A business, trust, or estate that needs an EIN will need to apply for it from the government. Similarly, a professional tax preparer will also need to request the tax preparer’s tax ID from the government.

What Do You Need to Obtain a Tax ID Number?

The requirements for obtaining a tax ID also vary based on the situation and the type of tax ID number that you need. Essentially, when you apply for a tax ID number, you need to prove that you meet the requirements to obtain that number. To do that, you may need to provide a range of different supporting documents.

How Do You Use a Tax ID Number?

Once you have a tax ID number, you will use it in a wide range of ways. As indicated above, you will use your tax ID number on tax forms. For example, if you submit a tax return for yourself or your business, you will use your personal or business tax ID number.

Similarly, if someone reports information about you on a tax form, they will also use your tax ID. For example, when a mortgage company sends out a statement of interest paid, they will put your tax ID number on the statement. When your employer issues a wage statement for you, they will also put your tax ID on the form.

 

However, tax IDs aren’t just for tax forms. They are often used as identifiers for other services such as the following:

• Setting up utility or communication accounts — For instance, your phone company may request a Social Security Number.
• Applying for loans — Your bank, for example, will want an EIN before issuing a loan to your business.
• Opening bank accounts — The bank will also want a tax ID if you need to open an account.
• Managing Social Security and Medicare benefits — These programs use your tax ID to identify you, track your contributions, and disburse your benefits.

These are just a few examples. As you use your tax ID, you may notice even more scenarios where it is required.

A tax ID is critical for people, businesses, and other entities. You need a tax ID for a vast range of essential business, personal, and tax functions. They help to eliminate confusion and safeguard your identity.