4 Simple (Yet Very Important) Differences Between ITIN, SSN, & EIN That You Need To Know
When the social security act was introduced by the 75th United States Congress, the social security numbers were primarily used to identify and track the benefits provided to retired elders and unemployed individuals.
But as time went by, social security has become a cornerstone for ensuring secure and compliant business functionality in the country. Today, social security is used for identifying, verifying, and validating reportable regulatory information, in addition to keeping a track of reportable retirement benefits.
Social security systems are embraced by global economies in some shape or form. This is because organized terrorism, money laundering, identity theft, and national security threats are at an all-time high.
The Patriot Act of 2001 introduced the KYC laws, which required all financial, banking, insurance, health care, and other industries to integrate a Know Your Client or Customer process, which fulfils the identity validation requirements. And for this reason, social security numbers are issued with stricter eligibility criteria and substantial identification evidence.
To further differentiate domestic individuals, entities, estates, and trusts from foreign or “alien” individuals and entities, the IRS and Social Security Administration categorized identification programs.
Social security information further helps monitor and deter terror regimes, corruption, and non-compliant practices within the country while helping the federal organizations observe the business and economic activity.
While there are several forms of identification that are widely used, we will be discussing the importance of an Individual Tax Identification Number, Social Security Number, and Employer Identification Number. We will also be looking at the key differences, importance, and fundamentals.
An individual taxpayer identification number is assigned to individuals, specifically to non-residents of the U.S. and their dependents. Individuals who are not eligible to obtain a social security number are issued ITINs to help them comply with the U.S. tax laws.
It is important to note that an ITIN does not allow individuals to collect any social security benefits, such as retirement grants, unemployment benefits, and other perks. It also restricts the individual from working in the U.S. and is only issued to individuals who are attending schools and universities for research and educational purposes, in addition to dormant dependents of non-residents.
A social security number is assigned to the citizens of the U.S. who are 18 or older and have a valid U.S. mailing address. Individuals who hold an SSN are allowed to work in the U.S. and have to use their social security information for job applications, grants, inheriting properties, and other transactional purposes.
A social security number is a taxpayer identification number (TIN), which allows the individual to collect retirement benefits, insurance, and unemployment benefits from the U.S.
Further, social security number is used by the IRS and federal organizations to verify an individual’s identity, income, tax records, and other security information.
Fundamentally, a social security number is used for identifying, verifying, and validating the tax information and monitoring the regulatory compliance status of an individual who is working and earning in the U.S.
An Employer Identification Number (EIN) is assigned to businesses, self-employed individuals, trusts, and estates with reportable incomes. It is used for identifying the business entity, its geographical operations, tax records, and regulatory compliance records. It is essential for independent contractors and self-employed individuals to furnish a TIN instead of an SSN for business tax filing purposes.
All business entities are required to report incomes and payments to the state tax departments and IRS. An Employer Identification Number is used across all business tax forms and documentation to identify the entity’s association with the reported transaction.
A business entity can apply for an EIN with Form SS-4 and the identification will be issued by the Social Security Administration or the IRS.
Social security number or taxpayer-identification number is issued to individuals and business entities that are operating within the U.S. for tax and regulatory compliance purposes. You can obtain the respective identification number to abide by the tax laws, federal laws, and work within the U.S. per the legal permits.