What Is A Federal Tax Id?

A federal tax id, also known as a taxpayer identification number, is a unique identifier the IRS uses to track earnings and taxes for individuals and businesses. Every individual who has income, is listed as a dependent on a tax return, or is claiming certain treaty benefits must have a tax id number, as must each business entity, estate, and trust. There are several types of identification numbers; all are issued by the federal government.

The most familiar type of federal tax id for individuals is the Social Security Number (SSN). It's issued by the Social Security Administration, and virtually every U.S. citizen has one from birth since it is required when claiming most dependents on a tax return. Legal immigrants and those on certain non-immigrant visas are also issued one.

The Individual Taxpayer Identification Number (ITIN) is for individuals who are not eligible for an SSN, such as certain nonresident aliens, but who have a requirement to file federal tax returns. It is formatted like the SSN but begins with a "9." The individual applies using IRS form W-7 and must provide proof of identity, visa documentation, and a valid federal income tax return (unless an exception applies).

Business entities must have an Employer Identification Number (EIN). Any trusts or estates that have reportable income must also have an EIN. There is no cost for an EIN, and the IRS provides an online application. Alternatively, an entity can file form SS-4 to be assigned its federal tax id. The EIN is available immediately when the online application form is used.

In addition to its use for filing the entity's own taxes, employers must include the EIN on employees' W-2 forms. It is often used at the state level for income and sales tax filings. Suppliers might also request the EIN in order to provide wholesale pricing, treating it as a reseller credential.

There are also some more specialized federal tax id numbers, all issued by the IRS. The Adoption Taxpayer Identification Number (ATIN) is a temporary number issued for a child when an adoption is still in process but the child can be claimed as a dependent. The Preparer Tax Identification Number (PTIN) is required of all paid tax preparers and must be included on all tax returns they complete.