A tax identification number (TIN) is a number the IRS, state governments, employers, and individuals use for tax purposes. It’s a vital series of numerals: Individuals need a TIN to file taxes, follow tax laws, and legally work for a U.S. employer. You’ll likely see a spot for this number to be filled in on certain documents relating to being hired or filing your tax return.
Corporations and non-profits also need tax identification numbers to comply with federal and state tax laws. In rare cases, individuals might have a tax identification number when they can’t obtain a Social Security Number, or if they adopt a child or work as a tax preparer.
Your tax identification number plays a key role in managing your taxes. Read on to learn more, including:
• What is a tax identification number?
• What are the different kinds of TIN numbers?
• How do you get a tax identification number?
• How do you find your TIN?
What Is a Tax Identification Number?
A tax identification number (TIN) is how the Social Security Administration (SSA) and Internal Revenue Service (IRS) identify individuals and corporations for tax purposes in the United States. The IRS and state governments use these numbers to:
• Collect taxes
• Provide tax refunds
• Create identifying tax documents
Knowing your TIN is an important part of understanding your taxes. Without one, you will like face significant issues in your tax-filing and potentially your financial life in general.
How Does a Tax Identification Number Work?
A TIN provides an identity to every U.S. taxpayer, including individuals and corporations. Individuals submit their TIN to employers to show they are eligible to work. The employer also uses the employee’s TIN for tax purposes.
At tax time, putting your TIN on your documents is essential to filing. This number is how the IRS differentiates between taxpayers. After you file taxes, the IRS provides a refund or notifies you of what you owe. Therefore, a TIN is crucial for ensuring your good standing with the IRS by paying the correct amount of taxes. Because different types of taxes apply to individuals and corporations, a TIN number can help distinguish your and your tax-filing history and status as you pay applicable taxes.
Recommended: How to Pay Less Taxes: 9 Simple Steps
Types of TIN Numbers
If you’re wondering what a TIN in taxes is, it’s not a single entity. There are actually five types of TIN numbers that serve various purposes or apply to different kinds of individuals or entities:
• Social Security Numbers (SSN). A SSN is used for individuals, sole proprietors, and LLCs made of one person needing an SSN.
How to get one: U.S. citizens usually receive an SSN when they’re born. If not, you can apply for one using IRS Form SS-5 .
• Employer Identification Number (EIN). An EIN is for individuals and businesses that have more than one member or employ workers.
How to get one: Employers can obtain an EIN by applying for one on the IRS’s website or submitting Form SS-4 by mail or fax. Applying physically takes more time, while applying online can get you an EIN almost instantly.
• Individual taxpayer Identification Number (ITIN). An ITIN is for individuals who pay U.S. taxes but don’t qualify for a Social Security Number. Important note: An ITIN does not make you eligible to work in the U.S., receive Social Security payments, or obtain the Earned Income Tax Credit.
How to get one: You can apply for an ITIN by submitting Form W-7 to the IRS.
• Adoption Taxpayer Identification Number (ATIN). An ATIN is for individuals who adopt a minor who is a U.S. citizen or resident but don’t have enough time to obtain an SSN for the minor before filing taxes.
How to get one: You can apply for an ATIN by submitting Form W-7A to the IRS.
• Preparer Tax Identification Number (PTIN). A PTIN is for individuals who receive payment to file taxes on behalf of others.
How to get one: You can apply for a PTIN on the IRS’s website or by submitting Form W-12.
Quick Money Tip: Direct deposit is the fastest way to get an IRS tax refund. More than 9 out of 10 refunds are issued in less than 21 days using this free service, plus you can track the payment and even split the funds into different bank accounts.
How to Find Your Tax Identification Number
You can look at one of your previous tax returns to find your TIN number. If you need your SSN, you can also find it on your Social Security card. In addition, any government documentation related to your tax identification number, such as licensure to open a business or adoption papers, will contain the number as well.
On the other hand, if you can’t access any of the necessary documents and tax time is approaching, call the IRS for guidance at 800-829-1040.
Recommended: What to Do If You Don’t Receive Important Tax Documents
Purpose of a Tax Identification Number
A TIN number allows the IRS and state governments to distinguish you from other taxpayers and businesses. Your identification ensures that you comply with tax regulations and don’t bear the tax burdens of others.
Plus, employers require workers to provide a tax identification number to show they can legally work in the United States. With identification, you can find employment, pay into the Social Security system, and receive Social Security payments when you retire.
Additionally, financial institutions use TIN numbers (usually SSNs) to identify borrowers. Your credit reports link your financial history to your SSN, meaning banks use your number to determine your eligibility for credit cards and loans. As a result, your tax identification number is necessary to open a bank account and access financial services.
The Takeaway
A tax identification number is essential for working or operating a business in the United States. In addition, a tax identification number allows you to pay into Social Security, follow tax regulations, receive a tax refund, and prepare taxes on behalf of others. Furthermore, banks use TIN numbers when deciding to provide services to businesses and individuals. Therefore, it’s necessary information to have year-round, not just during tax season.
FAQ
Do I need a tax identification number to file taxes?
Yes, you need a tax identification number for all tax documents. As a result, you need one to file taxes, receive tax refunds, and pay owed taxes.
What happens if I don’t have a TIN number?
If you don’t have a TIN number, you can’t show a U.S. employer that you can work legally, pay into Social Security, or register your business. To get a number, apply for a Social Security Card from the IRS with Form SS-5. You can also apply for an Individual Tax Identification number with Form W-7 or an Employer Identification Number with Form SS-4.
Am I allowed to change my TIN number?
You cannot change your TIN number. It is a permanent identifier the IRS holds in its records.
Are there pros and cons to a TIN number?
A TIN number allows you to work legally in the United States, form businesses, hire workers, follow tax laws, receive tax refunds, separate your personal finances from business operations, and pay into Social Security. It also helps you access banking services. The tradeoff is you’ll pay taxes to federal and possibly state and local governments, as all who are eligible must do.
Photo credit: iStock/Prostock-Studio
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
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