Tax ID number vs. Social Security Number (SSN)
The most common question asked by businesses is whether their tax ID number is the same as their Social Security number (SSN). This is because there are several instances where some businesses use SSN while others use a Taxpayer Identification Numbers (TIN) to also pay taxes. When it comes to tax ID number vs. Social Security Number (SSN), is there a difference regarding who it is issued to or they are the same and can be issued to both individuals and businesses? In order to answer this question, we need to look at what a tax ID is and how it is different from SSN especially for businesses.
Understanding tax identification number
The Tax Identification Number is also known as the Taxpayer Identification Number (TIN) and it is used primarily for tax purposes in the United States. It is also known as the Federal Taxpayer Identification Number and can be issued by the Internal Revenue Service (IRS) or the Social Security Administration (SSA). The issue and use of this Tax ID number is governed by Title 26 of the Internal Revenue Code and while 26 U.S.C. § 6109 defines identifying taxpayer ID numbers along with sharing of information and safeguards, confidentiality and nondisclosure rules, and sanctions among others.
It is important to understand the purpose of the Taxpayer Identification Numbers (TIN), and when you compare Tax ID number vs. Social Security Number, what type of business requires it.
Purpose of Taxpayer Identification Numbers – TIN
The Taxpayer Identification Number (TIN) is an umbrella term and it comprises several different types of tax IDs. The three most important TIN’s are Social Security Number (SSN), Employer Identification Number (EIN), and Individual Taxpayer Identification Number (ITIN). Apart from these three, TIN also comprises Taxpayer Identification Number for Pending U.S. Adoptions (ATIN) and Preparer Taxpayer Identification Number (PTIN). The purpose of this tax ID number is to ensure that individuals, businesses, or nonresident aliens with taxable income are able to file their tax returns and other related documents with the IRS or the SSA. A TIN number will also be required if you claim a treaty exemption, which will modify or reduce the taxation of income from a variety of sources including annuities, social security, and pension among others.
What is a SSN?
The Social Security number (SSN) is a type of Taxpayer Identification Number that is issued to U.S. citizens, permanent residents in the country, and working or temporary residents. The issue of this nine digit unique number is governed by section 205(c)(2) of the Social Security Act. The SSN is a tax ID number issued by the Social Security Administration (SSA). Its purpose was to track accounts held by individuals within the Social Security program. The SSN helps the Social Security Administration to identify as well as record accurately the self-employment earnings and covered wages of the holders of SSN. Individuals and sole proprietors have to obtain an SSN to file their tax returns.
How does an SSN differ from a Tax id?
When we compare tax id number vs. Social Security Number, the most important aspect that stands out is that SSN is a type of TIN. The major difference between Social Security number (SSN) and any other tax id is that this number is primarily used by individuals for filing taxes while a tax ID number like EIN is used by businesses to file their taxes.
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