ITIN, SSN, or EIN Number – What's the Difference?

Posted January 22, 2018 by Robert W. Ditmer in Keeping Compliant
We take a deep dive into what an SSN, ITIN, and EIN number is, and how each affects your employees' payroll.

The Internal Revenue Service announced in 2014 that effective immediately, “Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years.”

This announcement generated some confusion. People wondered if it means that an individual's Social Security Number (SSN) or a business's Employer Identification Number (EIN) will expire if it is never used.

To answer that question, we have to know what an ITIN is and how it differs from an SSN or an EIN.

We've also built a handy reference sheet outlining who needs what number. Download our free guide to The Difference Between SSN, ITIN, & EIN Explained

ITIN, SSN, and EIN Numbers

What Is a Social Security Number (SSN)?

An SSN is a Social Security Number. SSNs are nine digits (xxx-xx-xxxx) and belong to US citizens and authorized residents.

Individuals who are employed and receive wages must have an SSN or apply for one. Every employer who sets up payroll and pays an individual wages must request the employee's SSN and report the employee's wages using that number. Parents must also obtain an SSN for any child that the parent(s) claim on an income tax return.

SSNs are issued by the Social Security Administration (SSA), and anyone who is eligible to have an SSN may apply for one by completing an application known as the Form SS-5. Any taxpayer with an SSN must use the SSN as an identifying number on their tax returns.

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What Is an Employer Identification Number (EIN)?

An EIN is an Employer Identification Number. EINs are also nine digits, but formatted differently (xx-xxxxxxx).

Every business that pays employees or is required to file any business tax returns is required to obtain an EIN.

EINs can be obtained from the Internal Revenue Service by following the instructions in IRS Publication 1635, Understanding Your EIN.

What Is an Individual Taxpayer Identification Number (ITIN)?

An ITIN is a tax processing number that is issued by the IRS for individuals who are not eligible for an SSN, such as a foreign national or nonresident alien, but are required to file certain federal tax or information returns.

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Like an SSN, an ITIN number is nine digits in the format xxx-xx-xxx. But the first digit will always be a 9, and the second section of the number will be in the range of 70-88 (e.g., 9xx-88-xxxx). As of 2012, the IRS had issued 21 million ITINs to taxpayers and their dependents.

To obtain an ITIN, an alien with foreign status should complete Form W-7, Application for IRS Individual Taxpayer Identification Number. No one should have both an ITIN and an SSN. For example, if an SSN application is pending, an ITIN will not be issued even if the individual completes and submits a Form W-7.

Related post: Contractor or Vendor: How Do Businesses Classify for Correct Payment?

Will My ITIN, SSN, or EIN Numbers Expire?

When it comes to SSNs and EINs, the answer is no. They will never expire, and if you have one, it's yours forever.

For people with an ITIN, it’s a different story.

The IRS reported in 2014 that only about a quarter of the ITINs issued since the program began in 1996 had been used on tax returns.

The IRS also announced that any ITIN issued after January 1, 2013 would automatically expire in five years, even if the individual properly and regularly uses the ITIN.

Any individual who is a U.S. Citizen, a permanent resident, or a temporary alien resident who is authorized to work in the United States must have an SSN.

But this would have resulted in taxpayers who are foreign nationals, resident aliens, or nonresident aliens who have U.S. tax obligations needing to reapply every five years and filing returns under different ITINs.

So, under the policy, if a taxpayer files a return using an ITIN at least once every five years, the ITIN will not expire.

Taxpayers who have not used their ITIN to file a federal return at least once in the last three years saw their number expire on Dec. 31, 2017. ITINs with middle digits 70, 71, 72 or 80 also expired at the end of the year.

These taxpayers should renew their ITIN if they have a filing requirement in 2018. To do this, they will need to complete a new Form W-7.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.