The IRS received and processed approximately 261 million federal tax returns and supplementary documents in fiscal year 2021. When you file your taxes, whether you’re an individual or a corporation, please provide your tax number. Even after you’ve filed your taxes, you’ll need your tax ID to do things like make payments.
The specific tax identification number that an individual or business must use, however, can differ according to their circumstances. A tax identification number (TIN) and the many varieties of TINs that an individual or company may be required to use are defined here.
What is a tax identification number?
Entities involved in tax processing, such as the Internal Revenue Service (IRS), use tax identification numbers (TINs) to track pertinent financial transactions and associate filings with particular persons or companies. People require tax IDs because names and other popular identifiers aren’t always completely unique. Assigning a tax ID to a single person or entity simplifies the process of linking the relevant paperwork and records to the right person or entity.
A person’s Social Security number
For tax purposes, the United States issues Social Security Numbers (SSNs) to certain individuals, including citizens, permanent residents, and some temporary residents. The Social Security Administration (SSA), as its name suggests, issues and manages Social Security numbers.
Every single-digit Social Security number follows the same format: XXX-XX-XXXX. Many services and benefits offered by the government, including banking, insurance, and the ability to claim dependents, necessitate the use of Social Security numbers.
A unique taxpayer identification
If you are a legal resident of the United States but do not qualify for a Social Security number, you may be able to apply for an individual tax identification number (ITIN), which is essentially the same thing. Those who are neither citizens nor permanent residents of the United States, as well as their wives and dependents, are eligible to receive Individual Taxpayer Identification Numbers (ITINs). For most purposes, an Individual Taxpayer Identification Number (ITIN) can stand in for a Social Security Number (SSN) when an SSN is required.
The number assigned to an employer
Employers need an EIN. They let companies handle financial and tax concerns independently by separating the owner or operator from these obligations. XX-XXXXXXX is the somewhat different format used for EINs. Any company can apply for an EIN, and the application process is quick and simple online, so the applicant gets their EIN right away.
Additional Categories
People and businesses in the US utilize a wide variety of tax IDs; nevertheless, the ones listed above are by no means exhaustive. The others don’t see nearly as much adoption due to their specific use cases. Let me give you a rundown.
Taxpayer ID for Adoption
The Internal Revenue Service (IRS) issues temporary tax IDs, also known as adoption tax identification numbers. Only when the adoptive parents of a U.S. citizen or permanent resident file their own taxes before receiving an SSN for their adopted child do they receive these.
Taxpayer Identification Number for the Preparer
Preparers who work for pay receive preparer tax identification numbers (PTINs). On behalf of their clients, tax preparers are required to input their PTIN on their forms. This allows the government to keep tabs on who is doing tax preparation work.
