ITIN vs EIN: Key Differences and When You Need Each

Key Takeaways

• An ITIN (Individual Taxpayer Identification Number) is issued by the IRS for tax reporting purposes to individuals who are not eligible for a Social Security Number, such as nonresident aliens, foreign investors, or dependents.
• An EIN (Employer Identification Number) identifies a business entity for tax, banking, and compliance purposes — even if the company has no employees.
• ITIN vs EIN: ITINs are for individuals’ tax obligations, while EINs are for businesses’ tax and legal responsibilities.
• Foreign nationals and nonresident business owners often need both — an ITIN for personal tax filings and an EIN to form or operate a U.S. business.
• Understanding how and when to use each helps avoid tax issues, delays in business formation, and compliance penalties.

ITIN vs EIN is something you should understand if you're running a business. These are part of the set of numbers we use to identify ourselves and our businesses, in the same way we use passport numbers, drivers license numbers, and Social Security numbers.

A lot of business owners are curious about the difference between ITIN, or Individual Taxpayer Identification Number, and EIN, or Federal Employer Tax ID number. While they serve similar functions, there are important differences between the two, and it's important to understand both, especially in light of the 2014 announcement from the Internal Revenue Service. This announcement said that your ITIN will now expire if it's not used on your federal income tax return for five years consecutively.

Your social security number is the most common form of personal identification number used for tax purposes. SSNs are nine digits and belong to US citizens and authorized residents. If you are employed and regularly receiving wages, you will need an SSN. If you don't have one, you'll need to apply for one, and if you're not eligible for an SSN, you will need an alternative. That's where the ITIN and EINs come in. 

ITIN Numbers Explained

An ITIN refers to a number that enables a person to be identified and is a generic term employed by the Internal Revenue Service for tax purposes.

While it's possible to use ITINs for identification, their primary function is tracking the payments for individuals for their federal income tax, as well as other areas relating to tax.

There are three possible forms of taxpayer ID number: ITIN, EIN, and SSN. The SSN is the most commonly used number that people are familiar with, but there is some confusion over the specific uses of the other two.

An ITIN is issued by the IRS to individuals who aren't eligible for the more regularly used SSN, such as non-resident aliens and foreign nationals who are required to file information returns and federal tax returns.

ITINs are used only for tax reporting purposes by many non-US residents when they form Limited Liability Companies or Delaware corporations.

An ITIN is needed to file taxes with the IRS if, for example, at least one of a company's revenue streams comes from the US and profits and losses flow to a shareholder or member. In order to fill in the required tax information for the IRS, an ITIN is required.

Since 2012, 21 million ITINs have been issued by the IRS to taxpayers as well as their dependents. Applicants are usually required to supply a valid tax return and other supporting documents in order to establish their identity and determine other factors like eligibility for certain concessions.

When and Why You Need an ITIN

An ITIN is primarily required when a non-U.S. individual must meet tax reporting obligations but does not qualify for a Social Security Number (SSN). Common scenarios include:

• Nonresident aliens earning income from U.S. sources who must file federal tax returns.
• Foreign partners or investors in U.S. partnerships or LLCs receiving profit distributions.
• Dependents or spouses of U.S. citizens or residents listed on tax returns but ineligible for SSNs.
• International students, researchers, or scholars who receive taxable stipends or scholarships.

Importantly, ITINs do not authorize someone to work in the United States or provide immigration status — they exist solely for tax purposes. They also cannot be used to claim Social Security benefits or prove legal residency.

If an ITIN is not used on a federal tax return for five consecutive years, it will expire and must be renewed before future filings.

Employment Identification Number (EIN)

The Employer Identification Number, also known as your EIN, is another form of identification used by the IRS in the administration of tax laws.

The EIN is used for the identification of an entity to banks, other businesses, and, of course, the IRS. You don't necessarily need to be an employer to require an EIN.

Although a business generally requires an EIN if it has employees, there are other circumstances that require one, such as being a partnership, corporation, or Limited Liability Company (LLC). You'll also need one if you file taxes for any of the following:

• Alcohol
• Firearms
• Tobacco
• Excise
• Employment

You might also need an EIN if you pay for services from a contractor or another professional for a value of more than $600 in one calendar year.

The following bodies and organizations use EINs:

• Employers
• Partnerships
• Corporations
• Non-Profits
• Sole proprietors
• Estates
• Trusts

Because of the substantial differences between international tax laws, the proper classification of the entity is an essential factor that influences the EIN application and the subsequent tax liability.

If you have a new business, your bank will often require you to provide an EIN before they're able to open a business account. Think of it as your business' social security number - you need it to do business in the United States, and use any bank account for business.

Why and When a Business Needs an EIN

An EIN is essential for identifying a business in nearly every legal and financial context. Even businesses with no employees often require an EIN for compliance reasons. You’ll likely need one if your company:

• Operates as a corporation, partnership, or multi-member LLC.
• Hires employees or plans to in the future.
• Withholds taxes on income paid to non-resident aliens.
• Files excise, employment, or alcohol, tobacco, and firearms taxes.
• Opens a business bank account or applies for loans and credit lines.
• Applies for state or local business licenses or permits.

Banks, payment processors, and vendors often require an EIN before they will engage with your business. It also helps separate personal and business finances, a key legal step in maintaining limited liability protection.

ITIN vs EIN: Key Differences at a Glance

Although both ITIN and EIN are taxpayer identification numbers issued by the IRS, their roles differ significantly:

Understanding these distinctions is crucial for business owners — especially non-U.S. persons — who often need both an ITIN for personal tax obligations and an EIN for business operations.

New Heading: How to Apply for an ITIN or EIN

The IRS provides separate processes for each application:

• Applying for an ITIN: Submit Form W-7 along with a valid federal tax return and proof of identity (e.g., passport, national ID) to the IRS. This can be done by mail, in person at an IRS Taxpayer Assistance Center, or through a Certified Acceptance Agent.
• Applying for an EIN: File Form SS-4 online (fastest option), by mail, or fax. International applicants can apply by phone. EINs are generally issued immediately online.

While the ITIN process typically takes several weeks, the EIN process is often completed in minutes. Working with a legal or tax professional can help avoid errors that delay approvals.

Frequently Asked Questions

1. Can I use an ITIN instead of an EIN for my business?
   No. An ITIN identifies individuals for tax purposes, while an EIN identifies a business entity. Most banks, vendors, and government agencies require an EIN for company-related transactions.
2. Can I have both an ITIN and an EIN?
   Yes. Many foreign business owners need an ITIN for personal tax filings and an EIN to operate their business in the U.S.
3. Does an ITIN allow me to work in the U.S.?
   No. ITINs do not provide work authorization or legal status. They are solely for tax reporting.
4. How long does it take to get an EIN?
   If you apply online through the IRS website, you’ll typically receive your EIN immediately. Mail or fax applications can take several weeks.
5. Does my EIN ever expire?
   No. An EIN remains valid for the life of your business unless you cancel it or dissolve the entity.

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