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As you begin your career as a small business owner, it’s important that you take the time to set yourself up for financial success. This includes expanding your financial literacy to include a whole new set of words, terms, and acronyms you’ll need in order to do your work effectively. One example of important acronyms you’ve potentially never encountered or learned to distinguish between is TIN vs. EIN.
These are both examples of tax identification numbers. While they’re often misused or confused, as a business owner, it’s important to have a clear understanding of what each means and when to use them. In this article, we’ll cover everything you need to know in order to confidently do just that.
What’s an EIN?
EIN stands for Employer Identification Number. It’s sometimes also referred to as an FTIN, or a Federal Tax Identification Number. This unique, nine-digit number is issued by the IRS to every business operating in the country.
This number is used to identify a business, estate, or trust in federal reports and on tax forms, the same way that your Social Security Number is used to identify you when you do your personal taxes. But it’s also needed for business owners to complete a number of operational tasks, like opening a bank account, getting various permits and licenses you may need to legally run your business, and paying any employees who are working for you.
What’s a TIN?
TIN, on the other hand, stands for Taxpayer Identification Number. Rather than referring to a single number, the TIN is an umbrella term for a set of numbers issued by the IRS or Social Security Administration to all different individuals or entities to file their taxes. The creation of various TINs essentially allows for U.S. tax laws to govern and be administered to a broader group of people and entities, including non-U.S. residents and businesses.
The TIN umbrella covers, but is not limited to, the following numbers:
- Social Security Number (SSN)
- Employee Identification Number (EIN)
- Preparer Taxpayer Identification Number (PTIN)
- Adoption Taxpayer Identification Number (ATIN)
3 important differences between an EIN and a TIN and which one you need
Now that we’ve established a basic understanding of what each of these acronyms stands for and what their corresponding numbers are used for, let’s take a moment to explore the key differences between TIN vs. EIN:
- Scope: As TIN is an umbrella term, it contains something relevant to all taxpayers in the country, in some form or another—everyone who pays taxes or intends to claim treaty benefits needs one. An EIN, on the other hand, is only relevant for a small subset of Americans—those who run businesses that employ others or estates and trusts that must be reported for taxing.
- Use: An EIN is only used by businesses, estates, and trusts to report taxes and conduct certain administrative tasks related to their financial operations, while a TIN in its many forms can be used much more broadly.
- Relevance: Since an EIN is only used in select situations, it’s generally less relevant than the TIN. This doesn’t diminish its significance—an EIN is incredibly important to obtain for those whose business requires it. But when comparing TIN vs. EIN, TIN is more broadly relevant.
Which do you need: TIN vs. EIN?
Depending on your personal and professional situations, you may need to procure one or both of these numbers. As a taxpaying individual in the United States, you’ll likely have either a Social Security Number (SSN) or Individual Tax Number. If you decide to start a business, however, you may need to also acquire an EIN in order to complete some administrative tasks, like getting the necessary permits, paying employees, opening a business bank account, and paying taxes for your business.
Not all businesses require an EIN—LLCs and some sole proprietors, for example, are generally exempt, since these businesses are taxed through their owners. Here are some business circumstances that do require an EIN:
- Non-profits
- Estates and trusts
- Government agencies
- Corporations
- Individuals who employ others in a different capacity
If you are unsure whether or not your business requires you to have an EIN or a different TIN, consult the IRS directly as soon as possible—delaying the process could result in professional difficulties for you down the road.
How to get a TIN vs. EIN
Depending on which specific TIN you need, you’ll take different steps to apply—most require you to submit the relevant form to the issuing office, generally the IRS. Visit the IRS website to learn more about the different TIN forms available and which one you may need. You’ll find all the TIN variations described in detail, information on how to apply, instruction documents to help you fill them out, and a helpline you can call with your questions.
In order to get an EIN, simply visit the IRS website and apply for an EIN through their interview-style online form. The process is relatively quick and, once completed, you’ll receive your EIN immediately. Before you begin, check with the state in which you operate your business to confirm whether you require a state number or charter.
Why do I need to know the difference between an EIN and a TIN?
Simply put, as a small business owner, you need to have a strong working understanding of the difference between TIN vs. EIN so you know you’re appropriately registered and operating in compliance with the IRS. It’s important to understand the meaning of EIN vs. TIN, so you don’t find yourself struggling to complete important business tasks, fall behind in filing your taxes correctly, or encounter other unforeseen hurdles. Take the time to understand the difference upfront so you’ll be able to move swiftly and easily through your first year in business.
If you have questions about whether you need an EIN or a TIN, speak with your financial advisor. They’ll be able to help you get your business’ finances off on the right foot.
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1 Minimum $50 deposit required. See your Deposit Account Agreement for more details.
North One is a financial technology company, not a bank.
Banking services provided by The Bancorp Bank, N.A., Member FDIC.