International entrepreneurs who expand to the US have to face some obstacles before reaping the benefits of a global presence and a stable economy. However, these barriers are often imposed by a lack of education and information. Many freelancers and business owners think that to open a business in the US you need an American social security number and even a US visa. Nothing’s farther from the truth. Now you can learn the differences between each US tax identification, EIN, ITIN, and SSN and see what you need to sell on the American market.
What is a tax ID?
A tax ID is an identification number assigned by either individuals or companies and issued by a tax agency. In the US, the Internal Revenue Service (IRS) is responsible for levying and controlling tax at a federal level, for which they are also in charge of assigning tax ID (along with the Social Security Administration in the case of social security number).
The most important US tax IDs for business are the social security number (SSN), the employer identification number (EIN), and the individual taxpayer identification number (ITIN).
What is the social security number?
The social security number is either issued by the IRS or the Social Security Administration (SSA) to all American residents. The purpose of this tax ID is to track individual income and collect taxes. The SSN is not available for non-US residents.
When it comes to paying taxes, the ITIN is the non-US resident equivalent of the SSN (not in terms of employment or social benefits).
What is ITIN?
You need an individual taxpayer identification number if:
- You do not have an SSN and are not eligible to obtain one.
- You are required to provide a federal tax identification number or file a federal tax return.
- You are a non-resident alien required to file a US tax return o if you are a nonresident alien claiming a tax treaty benefit.
To apply for the ITIN, you need to fill out Form W-7 and submit it to the IRS, a US income tax return prepared by an accountant, and proof of identity and foreign status.
Foreign LLC members or Corp shareholders need their ITIN to file for US federal income tax and be compliant with US agencies. Something similar happens with the companies themselves that also need a different tax ID to carry out business in the US.
The ITIN will expire if you don’t use it to pay taxes in 3 years, which is why Globalfy’s US-tax-free plan clients should not bother getting it in the first place.
What is the EIN?
The EIN is the tax ID assigned by the IRS to American companies to be able to file taxes, hire personnel, and open business bank accounts.
For you to get an EIN you need to fill out and submit Form SS4 to the IRS. You can also open a business in the US without any type of US tax ID with Globalfy.
With Globalfy’s all-in-one business formation plan, you’ll get an LLC or a Corp in the US, your EIN, a business bank account, a virtual address in the US, a Registered Agent, and over US$200,000 in discounts and rewards.
What are the differences between SSN, EIN, and ITIN?
To put it in short: SSN is the tax identification number issued by the IRS to US residents, while the EIN is the ID for companies. ITIN is the SSN equivalent for non-US residents who want to do business in the US and be compliant with American laws and tax agencies.
You can get both EIN and ITIN with Globalfy, at the best prices and as soon as possible. EIN processing is also included free of charge in Globalfy’s all-in-one business formation plan. Check it here and see how to do business in the US from abroad, 100% online.