How Does an SSN Differ From a Tax ID?

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In the United States, a Social Security Number (SSN) is used to track individuals for Social Security reasons, and is also used as a national identification number for tax purposes. We routinely use SSNs to open bank accounts, apply for personal credit, and arrange for things like medical coverage and insurance.

Conversely, a tax ID, commonly called a Tax Identification Number or TIN, is a unique number assigned to a single business entity, or to a business owner who has hired employees. A tax ID number is not used for tracking Social Security, and instead helps the Internal Revenue Service (IRS) identify businesses that must be differentiated for various tax purposes.

As an employee, you will not need a tax ID number, sometimes called an Employer Identification Number, or EIN for short. If you’re starting a business, you might need to obtain a tax ID, other than your SSN, depending on the type of company and its planned business actions.

Why Get a Tax ID Vs. a Social Security Number?

 When comparing EINs and SSNs, the obvious difference is that SSNs identify people, and EINs generally identify businesses. While some entities allow you to use an SSN to conduct business, most do not, and therefore require alternative identification.

More specifically, you will not be able to use your Social Security Number on behalf of your business if any of the following statements are true:

  • I am a business owner and have hired employees
  • I own a corporation
  • I am a member of a partnership
  • I withhold taxes on income, not wages, paid to a non-resident
  • I have a Keogh plan
  • I am currently involved with organizations including, but not limited to, trusts, IRAs, nonprofits, farmers’ cooperatives, or estates

If you answered yes to any of these statements, you will have to apply for a separate tax ID called an Employer Identification Number (EIN).

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