TIN Number
A TIN Number, or Taxpayer Identification Number, is a unique identification number used for tax purposes that is issued by the Internal Revenue Service in the United States. It can be assigned in various formats such as a Social Security Number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN), among others. This number is essential for individuals and entities to manage their tax responsibilities and report their income to the IRS.
Last updated: September 28, 2023 • 6 min read
What Is TIN Number?
A TIN (Taxpayer Identification Number) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses and individuals for tax reporting purposes in the United States. There are different types of TINs which include: Social Security Number (SSN), Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), and more. Therefore, in essence, a TIN could be any unique number which is used to identify a tax payer.
What Is the Historical Evolution and Development of the Taxpayer Identification Number?
The Taxpayer Identification Number (TIN) has its roots in the Social Security Act of 1935 in the United States. While the original purpose of the number was to track individuals for social security benefits, it eventually became a de facto national identification number for taxation purposes.
1936: The creation of the Social Security Number (SSN) began as a means to track workers' earnings over the course of their lives to determine social security benefits. It was not originally intended for tax purposes.
1961: As part of the Internal Revenue Code of 1954, the IRS began using the SSN as an identifier for personal tax returns, making it the first form of TIN for individuals.
1972: IRS started requiring taxpayers to list the SSN of any dependent over the age of 5. This was to combat taxpayers claiming fake dependents.
1986: With the Tax Reform Act of 1986, the age was lowered from 5 to 2, and then eventually to include dependents of any age.
1996: The Individual Taxpayer Identification Number (ITIN) was created for foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs.
1974: IRS created the Employer Identification Number (EIN) for businesses to report and pay the taxes they withhold on behalf of their employees.
Presently: TINs cover a broad spectrum of numbers that serve the primary purpose of tracking payments to individuals and entities within the US tax system. This includes SSNs, EINs, ITINs, Adoption Taxpayer Identification Number (ATIN) and Preparer Taxpayer Identification Number (PTIN).
Through this historical evolution, SSNs and other forms of TINs have become integral to the functioning of the U.S tax system. Its use has expanded beyond the realm of taxation and social benefits, serving as a form of identification in a variety of contexts.
What Are Some Different Types of Taxpayer Identification Numbers?
Below are some types of Taxpayer Identification Numbers (TINs):
SSN (Social Security Number): This type of TIN is issued to U.S. citizens, permanent residents, and temporary residents under section 205(c)(2) of the Social Security Act.
ITIN (Individual Taxpayer Identification Number): This type of TIN is issued to individuals who are required to have a U.S. taxpayer identification number, but who do not have, and are not eligible to obtain a Social Security Number.
EIN (Employer Identification Number): This type of TIN is issued to businesses for tax administration.
ATIN (Adoption Taxpayer Identification Number): This type of TIN is a temporary nine-digit number issued by the IRS to individuals who are in the process of legally adopting a U.S. citizen or resident child but who cannot get an SSN for that child in time to file their tax return.
PTIN (Preparer Taxpayer Identification Number): This type of TIN is issued to paid tax return preparers. Preparers are required to include this number on the tax returns they prepare.
How Does a Taxpayer Identification Number (TIN) Differ From an Employer Identification Number (EIN)?
A Taxpayer Identification Number (TIN) refers to a unique identification number that the IRS assigns to taxpayers for federal tax purposes. It's a general term that encompasses several different types of identification numbers, including the EIN, SSN, ITIN, ATIN, and PTIN.
An Employer Identification Number (EIN), on the other hand, is a specific type of Taxpayer Identification Number. The EIN is assigned by the IRS to business entities operating in the United States for the purposes of identification and taxation. It's used to identify businesses in a manner similar to how the SSN or ITIN is used to identify individuals.
What's the Difference Between TIN Number and SSN (Social Security Number)?
A Taxpayer Identification Number (TIN) is a broad term that refers to a unique nine-digit identifier for tax purposes in the United States while a Social Security Number (SSN) is a type of TIN assigned to U.S. citizens, as well as permanent and temporary residents.
In other words, a TIN is the general term for the identifying number assigned to an individual or business entity by the IRS, and this may take different forms such as the SSN in case of individuals, or an EIN (Employer Identification Number) for businesses. The term TIN covers all these different forms of identification numbers.
The main difference is that an SSN is initially issued for tracking personal accounts within the Social Security system and has grown to become a personal identifier for residents and citizens within the US beyond this scope. Meanwhile, the TIN is used more broadly for a wider set of tax-reporting purposes not limited to individuals. Therefore, an SSN falls under the umbrella of TINs but they are not synonymous.
What Are the Advantages Associated With Having a Taxpayer Identification Number?
Tax Reporting: Allows individuals and business entities to comply with tax laws by reporting income, claiming tax benefits, and paying any taxes they owe.
Identification: TINs provide a unique identifier used to track individuals or business entities within the U.S. financial system.
Access to Benefits: For individuals, the SSN, one form of TIN, is necessary to gain employment, access Social Security benefits and certain other government services.
Opening Financial Accounts: Many financial institutions require an SSN (for individuals) or an EIN (for businesses) to open an account.
Applying for Licenses: Many professional and business licenses require an SSN or EIN.
Credit Reporting: SSNs are used by credit bureaus to track credit history and determine creditworthiness.
Legal Requirement: Depending on the scenario, it is a legal requirement to have a TIN. For example, employers are required to obtain a TIN to report income paid and taxes withheld for employees.
What Are the Potential Drawbacks or Risks Associated With Using a Taxpayer Identification Number?
Identity Theft: There's always a risk that your TIN (especially SSN) could be stolen or accessed by unauthorized individuals. This can potentially lead to identity theft, resulting in financial loss or damage to credit rating.
Misuse: Social Security Numbers, a type of TIN, can be misused in fraudulent activities if not properly protected.
Privacy Concerns: The extensive use of TINs, and especially SSNs, in non-tax contexts may give rise to privacy concerns. TINs are sensitive pieces of personal information.
Complexities for Non-Residents: Non-residents might face difficulties navigating the process of obtaining ITINs.
Delayed Processing: Obtaining a TIN (e.g., ITIN or EIN) can take several weeks, which can delay business operations or tax filing.
Renewal Requirements: Certain types of TINs, like the ITIN, come with renewal requirements which can be viewed as inconvenient.
Administrative Overhead: Businesses or individuals may need to spend time ensuring they're using the correct type of TIN, keeping their TIN confidential, and reporting any lost or stolen TINs. This administrative overhead can be a burden.
Which Employers Are Most Likely to Be Impacted by the Use of TINs?
All employers in the United States are impacted by the use of TINs, especially those that hire employees, independent contractors, or have a tax reporting requirement. Here are a few specific examples:
Small Businesses: These employers need an EIN to open bank accounts, apply for business licenses, and file tax returns. They also use their employees' Social Security Numbers (SSN) or ITINs to report income and withhold taxes.
Corporations and LLCs: These entities must have an EIN for federal tax filing, tracking their employees for tax purposes, and other business transactions.
Non-profit Organizations: Like other businesses, non-profits need an EIN to open bank accounts, apply for tax-exempt status, and handle employee payroll.
Employers with Non-Resident Alien Employees: These employers would interact with ITINs, which are issued to non-resident aliens who must pay taxes but aren't eligible for an SSN.
Government Agencies: These entities use EINs for their payroll and other operational needs.
Self-Employed Individuals: Though not "employers" in the traditional sense, they must use their SSN (or EIN if they choose to obtain one) for income reporting and paying self-employment taxes.
It's generally safe to say that any employer involved in hiring personnel, paying wages or taxes, or conducting business transactions will in some way interact with or be affected by TINs.