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As a business owner, you need to know the different kinds of identification that can be accepted for different business purposes. A Taxpayer Identification Number i s a generic term used by the Internal Revenue Service to designate the types of numbers which it allows to be used for tax and identification purposes. Tax ID numbers are primarily used to track payments to individuals for federal income tax and other tax purposes, but they have also become used for a variety of identification purposes.
A social security number SSN is the most common identifier for personal identification and tax purposes. SSN's are used by employers to report the annual income of employees for their income tax returns.
It's used to determine Social Security and Medicare eligibility and benefit payments. The SSN is also used to identify workers for work eligibility through the U. Customs and Immigration system. An employer can accept an ITIN from an individual for tax purposes for filling out a W-4 form at hire, for example.
ITIN's are for tax reporting purposes only; the number cannot be used for identification purposes. Although it's labeled as an identifier for "employers," you don't have to have employees to need an EIN. In addition to being used for paying business income taxes, an Employer ID is used for other situations:.
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