Stick with the reading for a while then you will get the answers to all the questions swirling in your mind!

US Tax Identification Number (TIN): An Overview 

TINs or Tax Identification numbers are used for identifying a business, a person, or any official documentation for tax matters. The US tax filing system works solely on the basis of different tax identification numbers that persons or corporations need. However, some corporations need to track down probably more than one TIN to keep track of. These federal numbers are assigned by the IRS (Internal Revenue Service) or SSA (Social Security Administration) to corporations and individuals. 

The TINs generally consist of a unique set of numbers that identifies corporations and entities like NGOs. It is mandatory for each entity or person to apply for a TIN. Once these are approved, the state assigns a special number to the applicant. IRS will go through the complete checking system so that the applicant can process the tax filing process easily.

However, this is not a single purpose. A detailed TIN system serves you in many other ways. 

Tax Identification Number (TIN): Purposes 

Some businesses like sole proprietors are exempted from having a TIN, but some can’t get the desired results without having one. Most of the C-Corps need a tax ID number and some of the main reasons are listed below. 

• You need a TIN when you want to file your taxes separately from your personal taxes. It all depends on your business entity. It is a must for all Corporations, partnerships, and LLCs to have a TIN that elects to be taxed. 
• If you are in the US and hiring employees for your business, then you need a tax ID number to operate legally. 
• The foremost consideration is to have an ID if you have a Keogh plan. It means any tax-deferred pension plan will need to have a tax ID to conduct the plan. 
• You may be required to have a business tax ID if your business is bound to pay certain taxes beyond income tax. For example, a trucking company is bound to pay excise taxes. A certain industry will define whether you need an ID or not. 
• You need a tax ID for credit by banks and other lenders. The tax ID information is highly reliable for bureaus to ensure that the application is in the right hands. The agencies use these TINs to track and report any credit history of an individual. 
• Employers need these identification numbers for hiring the right resources to work in the US. 

In addition, there are some financial bodies in the US that won’t allow you to have any business without an ID first. In that case, some licenses and seller permits are present but not always in the accurate case. Regardless of any defined reasons, it is good for your corporation to have a TIN in case it is needed at any time. 

Licenses and Permits 

The choice of getting any license, permit, or ID solely depends on your business structure. The requirements vary by local laws, state, and by industry. Other than business structure, the choice also varies according to your business activities, location, and type. One such example is the seller permit which is also called the sales tax. It is a business license that allows you to collect taxes on taxable goods and services. Certain states and the federal government require people to get certified by the national board or state for their professional services. 

Always review the requirements of your state prior to learning what permits, licenses, or TINs you actually need for your business. 

Types of Tax Identification Numbers (TINs)

The businesses need to register themselves first with the SSA (Social Security Administration) for TIN approval. However, the system became more classified in 2021 with the emergence of different types of TINs. All types serve different purposes and again vary according to your business structure and nature. Today, the TINs are used to identify not only businesses but also self-employed individuals and their operational status, tax compliance status, regulatory compliance status, and any other information. 

There are several types of TINs available for individuals, tax preparers, and entrepreneurs.

Take a look at these types thoroughly!

Social Security Number (SSN)

It is the most common type of TIN with nine digits and formatted as XXX-XX-XXXX. SSNs are issued to US Citizens and some temporary residents by the Social Security Administration. This type of TIN is required to secure legal employment in the US along with government services and some social security benefits. The IRS uses the SSN to track an individual’s retirement benefits, tax history, income, security assessments, and regulatory standing. The information is further used for accessing necessary measures and penalties if the record shows any kind of non-compliant practice. 

Employer Identification Number (EIN)

The IRS issues an EIN or FEIN (Federal Employer Identification Number) to identify a business. It is also a 9-digit number but formatted as XX-XXXXXXX. You can only obtain the EIN if your business is a C-Corp, S-Corp, LLC, or any kind of partnership and you have employees. The IRS uses this number to identify trusts, corporations, and estates that pay taxes. The companies use this to report their capital gains and income. It’s application is almost free and you can easily obtain it. 

Individual Taxpayer Identification Number (ITIN)

Certain resident aliens, their spouses, dependents, and nonresidents can obtain ITIN. It is also a nine-digit number and formatted like an SSN such as XXX-XX-XXXX. However, the number doesn’t give any authority to individuals to work in the US. It can be taken as a substitute for a social security number. 

Preparer Taxpayer Identification Number (PTIN)

This number is for the paid tax preparers to include on returns. You need a PTIN if you assist or prepare federal tax returns for compensation. Unlike other TINs, it is an eight-digit number. Any preparer who does a tax return for an individual must need a PTIN. 

Adoption Tax Identification Number (ATIN)

The IRS issues this nine-digit number for taxpayers who are adopting a child domestically if they do not obtain the child’s SSN. This only applies to domestic adoptions to complete their tax returns promptly. 

Process of Obtaining A Tax ID Number 

You need to fill out an online application at the IRS website to get a business tax ID number. You just need to follow these three simple steps to get a tax ID number.

Choose State and Register Your Business 

Register your business in your chosen state after filling out an online application. The requirements and the ID types vary from state to state. You need to start with your business name, formation date, and state name. Your business name must be approved by the state of operation prior to your tax ID application. 

Gather Data

Before moving forward with the application, you will need quite a bit of information about the business itself. You need to get the following information while filling out the application such as business name, business owner, personal tax identification number, mailing address, business structure, state chosen, number of employees, type of business entity, etc. This also involves the status of your incorporation as well such as in case if you are migrating from an LLC. 

Remember, your business must be US-based and the applicant must have a valid ITIN. 

Submit Tax ID Application

Once you’re done with everything, validate the given information and immediately get the tax ID number in pdf form from the IRS. 

Remember to fill out the forms carefully and get an expert attorney’s help for dealing with legal matters. As a non-US resident, it is highly crucial to remain updated about all the given information and form types. 

What You Should Do In Case Of Using A Wrong TIN Number?

Human Error is still a most occurring phenomenon and we can’t deny the fact. In case, you write the wrong tax identification number on your tax return, the IRS will find it. It will ask you to correct it by the provided deadline. 

Read further in the blog to correct the mistake. 

Of course, there’s always the possibility of mistakes with so many documents going in and out. If you notice your mistake prior, then you must correct it as soon as possible. It is always important to cross-check with everything because the IRS will charge you interest and penalties and you will surely not want that. 

The foremost penalty is Failure to File Correct information returns and impose a penalty on every incorrect information. But, the bright side is that the IRS will issue one penalty for each return, regardless of how many incorrect details are there. The penalty will be the greatest if they find multiple mistakes on the same return. The dark side is if the agency decides that the mistakes are made out of ‘intentional disregard’, then they might file a criminal suit against you. 

Now, the most important question is getting the wrong tax ID information on taxes. You can correct the mistake with form 1040-X. Send the complete explanation with the correction made to the relevant schedule. The process of correcting the tax ID mistake is the same for all business entities. 

Getting the right tax identification number and using it in the right setting is highly crucial for your company’s growth. Always be prepared regarding different tax guidelines and contact fastcorpusa for more guidance. 

Sum Up

Once you have a TIN in the US, you will be able to conduct business in the US even if you’re located overseas. The process might be time taking but it will be worthwhile. So, go ahead and chase your entrepreneurial dreams without giving a second thought. 

Ready to sell overseas? Check out our info@fastcorpusa.com for additional information and tips! Our online specialists will help you take your business to the next level in the tax game.