ITIN vs EIN: What Is the Difference?

Foreign founders establishing a U.S. entity typically hear about both numbers in the same week, and often from the same formation service, and it’s easy to think of them as two steps in the same process. They’re not. One is used to identify you (as an individual) to the IRS. The other is used to identify your business. Confusing the two can lead to applications languishing for months, bank accounts in limbo, and tax returns getting filed with the wrong number.

An ITIN (Individual Taxpayer Identification Number) is used for individuals who have a U.S. tax filing requirement but aren’t eligible for a Social Security Number. An EIN (Employer Identification Number) is used for businesses and other entities (trusts, estates, etc.) for the purpose of filings, payroll, banking, and informational reporting.

Many people need both, and many need only one. Which one you need depends on whether the tax obligation is personal or related to the business you own.

ITIN vs EIN: At a Glance

ITIN: Who Needs It?

You need an ITIN if you are:

• A non-resident alien with US source income required to file a US tax return
• A foreign national resident in the US without SSN eligibility (some visa categories)
• A spouse or dependent of a US citizen or resident alien, required to be claimed on a tax return
• A foreign investor in a US business (required to file Form 1040-NR or claim treaty benefits)

IMPORTANT: An ITIN does not authorise you to work in the US, qualify you for Social Security benefits, or make you eligible for earned income tax credit. It is solely a tax filing number.

EIN: Who Needs It?

You need an EIN if you:

• Have a business with employees (required for payroll tax reporting)
• Operate as a corporation or partnership (required for business tax returns)
• Have a Keogh retirement plan
• Are involved with certain types of trusts, estates, or non-profits
• Want to open a business bank account (banks require EIN for business accounts)
• Need to file 1099s for contractors (you use your EIN as the payer's TIN)

Sole proprietors without employees can use their SSN for most purposes, but many choose to obtain an EIN to avoid using their SSN on 1099 forms sent to contractors, protecting against identity theft.

When You Need Both EIN and ITIN

The overlap is most common with foreign founders. The LLC gets an EIN so it can open a bank account, sign up for payment processors, and meet its own IRS filing obligations. The owner may later need an ITIN if the business income creates a personal US return, if they want to claim treaty benefits, or if a bank or processor asks for a personal tax ID alongside the company's.

Order matters here. Getting the EIN first keeps the business moving. Working out the ITIN question early, before the first year's returns come due, avoids an application stuck in processing right when the filing deadline arrives.

We had formed our US company but were stuck because the EIN and ITIN process hadn't been completed, which was delaying our banking and tax setup. Profitjets helped us organize the required documentation, coordinate the applications, and follow up on the outstanding requirements. Once everything was in place, we could finally move forward with opening the business account and handling our US tax obligations.

Which One a Foreign Owner Actually Needs

The question usually arises for someone outside the US who has formed a company there, and the answer is often both, for different reasons.

The entity needs its own identification number to open a bank account, to be engaged by customers, to employ anyone and to file. That is the employer identification number, and it belongs to the business rather than to any person.

The individual needs a taxpayer identification number only where they personally have a US filing or reporting requirement, which depends on the structure and on how income flows. A number of situations create one without the person ever having set foot in the country. Because the answer turns on structure, it is worth establishing before the entity is formed rather than afterwards.

Applying, and What Slows It Down

Both applications are straightforward on paper and both have well-known friction points for applicants outside the US.

• An entity number can generally be obtained more quickly by someone with a US identifying number, with alternative routes available to those without one
• An individual number application usually has to evidence identity and foreign status, often alongside the return that creates the need for it
• Original documents or certified copies are typically required, and using an authorised agent avoids sending originals
• Processing at busy times of year is slower, so applying well before a deadline matters

Procedures and forms for both change periodically. Confirm the current route and documentation with the IRS before applying, since a rejected application usually means starting again rather than correcting.

Keeping the Numbers Current

An entity number does not expire, but the details attached to it need to stay accurate. A change of responsible party, of address or of business name should be notified, and the notification is frequently forgotten.

An individual number can lapse if it is not used on a return for a period, and a lapsed number causes returns to be delayed and credits to be denied until it is renewed. Renewal is straightforward if you notice, and disruptive if you discover it at filing time.

Keep a short record of which numbers exist, what they are attached to and when they were last used. For a business with an overseas owner this is the kind of detail that nobody owns until it causes a problem.

Common Mistakes With Both Numbers

The same few errors account for most of the difficulty people have with these identifiers, and all of them are avoidable at the point the number is obtained.

• Applying for the wrong one, usually an individual number where the business needed its own
• Obtaining a business number and then never notifying a change of responsible party or address
• Using a trading name rather than the exact registered legal name on the application, which produces mismatches later
• Letting an individual number lapse through non-use, then discovering it at filing time
• Applying too close to a deadline, since processing is slower at busy points in the year

Where a business has an overseas owner, the sequence matters as well as the numbers: establishing what the structure requires before forming the entity avoids obtaining a number that turns out to be the wrong one. Current procedures for both applications are published by the IRS and do change.

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Written by

Anu Gupta, CA, EA, B.Tech

Anu works with US businesses on tax and entity questions at Profitjets, from choosing a structure to the filings that follow it. She writes about the decisions owners make once and then live with for years. Connect on LinkedIn