Every individual or business entity who is qualified to pay taxes in the United States is given a unique nine-digit number by the Internal Revenue Service (IRS) for identification purpose for easy administration of tax laws. This is called as the federal tax ID number or the IRS tax ID number. This number is referred to as a Taxpayer Identification Number (TIN) if it is used for identification purpose and referred to as an Employment Identification Number (EIN) when used for reporting employment taxes. Once assigned, a TIN cannot be canceled or re-assigned to anyone else. It is a mandatory requirement for all taxpayers to furnish their IRS tax ID numbers on all tax-related documents like filing income tax returns, processing income statements while claiming tax treaty benefits, availing exemption for effectively connected income, or on certain annuities for example.

This IRS tax ID number is a mandate for all residents of the United States and is referred with different names depending on the issuing body and the purpose of usage.

• Social Security Number (SSN): This is an ID number issued by the Social Security Administration to individuals who are eligible to pay taxes. One is required to submit proof of identity, age, and nationality (US citizenship or foreigner) along with a completed Form SS-5 to apply for it.
• Employer Identification Number (EIN): This number is given to employers, sole proprietors, corporations, partnerships, estates, non-profit organizations, trusts, government agencies, certain individuals, and other similar business entities. It is used to identify all those who have income which is required to be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts.
• Individual Taxpayer Identification Number (ITIN): This is a 9-digit tax processing number issued to foreigner nationals, their spouses, and dependents. These expat individuals can be either residents or non-residents in the United States and those who cannot get an SSN. This number is formatted similar to an SSN but begins with the number “9” and can be obtained by completing an IRS Form W-7 along with substantiating documents for proving foreigner/ alien status and identity.
• Adoption Taxpayer Identification Number (ATIN): This is issued to individuals who would like to legally adopt a child who is a resident or a citizen of U.S., and an SSN is not available for that child at the time of filing their tax returns. This 9-digit number is temporary (only till the adoption process is completed) and can be availed through Form W-7A.
• Preparer Tax Identification Number (PTIN): This number is mandatorily issued to all paid tax preparers who wish to claim compensation or refund on any federal tax return. It is required for every preparer to have a valid PTIN from January 1, 2011, onwards and it is required to get a renewal done for all those who possess this number before the said date. However, one might still choose not to apply for a PTIN by using Form W-12.

An IRS tax ID number would be required for the following purposes:

• For individuals or businesses to open an account with any financial institutions such as banks, credit unions, and brokerage houses.
• For individuals to claim an exemption for spouses or other dependents.
• Individuals who are employers may use EIN or SSN for reporting taxes withheld on behalf of their employees.
• For a business to pay its employees and to file business tax returns.
• For a business to be considered a partnership, LLC, Corporation, S-corporation, Non-profit organization, etc.
• All organizations for filing at least a federal income tax return and claim exemptions for non-profits or no-incomes.
• For those who are starting a new business or want to start a business line of credit.
• For individuals or business that have either already hired or will hire employees (includes household employees) and will pay a salary.
• For the creation of a trust or estate.
• For availing a pension plan.

All applicants must be careful about several fraudulent individuals/ companies that exist, which charge money for these services. Applying for an IRS tax ID number is free of cost and the procedure is easy.

• For domestic applicants: It can be applied by through Form SS-4 application either online, by fax, by mail, or over the telephone. It should be noted that there is a daily limitation on issuance of EIN to one per responsible party per day to make sure there is a fair and equitable treatment for all taxpayers. A third-party designee authorization must be done and be validated with the signature of the taxpayer.
• For individuals who are foreign nationals: They can apply for an SSN on Form SS-5 or an ITIN on Form W-7 as the case may be. The documents for an ITIN along with a copy of a federal income tax return can be either mailed, presented at IRS walk-in offices, or processed through an Acceptance Agent authorized by the IRS.
• For foreign business entities that need to claim an exemption from withholding because of a tax treaty (claimed on Form W-8BEN): It is required to apply for an EIN by submitting Form SS-4.

It is safe to say that all financial transactions that are legal require being associated with an IRS tax ID number.