Tax Identification Number – Definition

Cite this article as:"Tax Identification Number – Definition," in The Business Professor, updated May 5, 2019, last accessed October 19, 2020, https://thebusinessprofessor.com/lesson/tax-identification-number-definition/.

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What is a Tax Identification Number?

A tax identification number (TIN) is a recognition number that the Internal Revenue service (IRS) issue to individuals and organizations for tax purposes. TIN is a nine-digit number that IRS uses in tracking tax obligations in the United States. A business with paid employees is expected to obtain TIN from the Internal Revenue service and is required to supply all tax information including tax returns which will be submitted to IRS. TIN often appears as XX-XXXXXXX.

A Little More on What is the Taxpayer Identification Number

The Internal Revenue service (IRS) allot tax identification numbers in diverse forms. This taxpayer identification number is given to individuals for the purpose of remitting tax to IRS in the United States and other Common Reporting countries. TINs are assigned to individuals while EINs (Employer Identification Numbers) are alloted to companies.

Although TINs are alloted in form of Social Security Numbers (SSNs), they are strictly for tax remittance and reporting purposes. Most TINs are issued in the XX-XXXXXXX. format but there are some other forms of TINs such as the adoption tax identification number (ATIN), individual tax identification number (ITIN), the preparer tax identification number (PTIN) and others. Non-business entities, trusts and fiduciaries are given tax ID numbers.

Unlike TINs, Social Security Numbers are always in the XXX-XX-XXXX. SSNs are nine-digit tax identification numbers for individuals, they are issued by the Social Security Administration (SSA). In the United States, SSNs are issued to citizens, lawful permanent residents, and some temporary (working) residents in the country. The Social Security Administration (SSA) uses SSNs to track individual for social benefits and purposes. For instance, with a SSN, an individual (whether a child or adult) can become dependent for income tax purposes. SSA issues SSNs for individuals without any cost but it also offers certain fee-based services.

Employer Identification Numbers (EINs) are assigned to businesses, corporations and partnerships. These numbers are assigned by the Internal Revenue Service (IRS) in order to easily identify businesses and also track tax reporting. EINs is also a nine-digit number which IRS issues to businesses and corporations and not individuals. It is important that businesses 0r organizations apply for EIN and file their tax returns and reports to the IRS using the identification number. Every registered business or company is entitled to an EIN without any cost.

Individuals who are not eligible to a Social Security Number (SSN) are obliged to have the Individual Tax Identification Number (ITIN). ITIN is a unique identification issued to individuals for tax reporting purposes only. The Internal Revenue Service is also saddled with the responsibility of assigning ITINs to individuals who do not qualify for SSNs, in most cases, these individuals are aliens or non-residents. In cases of married couples who have one party as an alien, the ITIN must be included in the tax return and report filed and submitted to IRS. For an individual to obtain an ITIN, a W-7 form must be filled and submitted alongside documents showing that the individual is a nonresident alien.

In cases of pending adoption where the adoptive parents are unable to obtain a Social Security Number (SSN) for a child, an Adoption tax identification number (ATIN) can be issued. ATINs are issued by IRS to cater for adopted children who cannot secure SSNs and their adoptive parents need to file a tax return to IRS. However, it is noteworthy to note that only children who are citizens of the United States can be assigned ATINs. Also, children who qualify for ATINs are those whose adoption processes have started but pending.

The Preparer Tax Identification Number (PTIN) is a number that enables tax professionals to prepare tax returns when they are paid to do so. Paid tax return preparers use or submit the PTIN to the IRS for federal tax returns and claims. By Jan 1, 2011, IRS started started requesting a PTIN on tax returns or claims submitted by tax professionals or tax preparers. PTINs protect the privacy of professionals who prepare tax and at the same time helps IRS to keep a record of these tax preparers. Hence, before any tax preparer or professional can prepare tax claim, return or refund for clients, they must have a PTIN.

References for Tax Identification Number

Academic Research on Taxpayer Identification Number (TIN)

Social Security numbers issued: A 20-year review, Long, W. S. (1993). Soc. Sec. Bull., 56, 83.

Closing the gap: automated screening of tax returns to identify egregious tax shelters, DeBarr, D., & Eyler-Walker, Z. (2006). ACM SIGKDD Explorations Newsletter, 8(1), 11-16.

The Effect of Tax Socialization, Tax Knowledge, Expediency of Tax ID Number and Service Quality on Taxpayers Compliance with Taxpayers Awareness as Mediating …, Savitri, E. (2015). Procedia-social and behavioral sciences, 211, 163-169.

Improving Tax Compliance in Developing Countries via Self-Assessment Systems-What Could Bangladesh Learn from Japan, Sarker, T. K. (2003). Asia-Pacific Tax Bulletin, 9(6), 3-34.

Modernizing tax administration, de Jantscher, M. C., Silvani, C., & Vehorn, C. L. (1992). Fiscal policies in economies in transition, 120-141.

Attrition in the statistics of income panel of individual returns, Christian, C. W., & Frischmann, P. J. (1989). National Tax Journal, 42(4), 495-501.

Tax administrations and small and medium enterprises (SMEs) in Developing Countries, Baurer, L. I. (2005). The World Bank.

Managing small and medium-size taxpayers in developing economies, Terkper, S. (2003). Tax notes international, 29(2), 211-229.

Business in the United States: Who Owns It, and How Much Tax Do They Pay?, Cooper, M., McClelland, J., Pearce, J., Prisinzano, R., Sullivan, J., Yagan, D., … & Zwick, E. (2016). Tax Policy and the Economy, 30(1), 91-128.

Strategic tax and financial reporting decisions: Theory and evidence, Mills, L. F., & Sansing, R. C. (2000). Contemporary Accounting Research, 17(1), 85-106.

 

Closing the gap: automated screening of tax returns to identify egregious tax shelters, DeBarr, D., & Eyler-Walker, Z. (2006). ACM SIGKDD Explorations Newsletter, 8(1), 11-16.

National Research Program: Measuring Taxpayer Compliance Comprehensively, The, Brown, R. E., & Mazur, M. J. (2002). U. Kan. L. Rev., 51, 1255.

The influence of the introduction of self assessment on compliance behaviour of individual taxpayers in Malaysia, Loo, E. C. (2011).

The relation between the use of tax preparers and taxpayers‘ prepayment position, Christian, C. W., Gupta, S., Weber, G. J., & Willis, E. (1994). The Journal of the American Taxation Association, 16(1), 17.

A Coherent Policy Proposal for US Residence-Based Taxation of Individuals, Blum, C., & Singer, P. N. (2008). Vand. J. Transnat’l L., 41, 705.

Report and Recommendations on Taxpayer Compliance, Aidinoff, M. B., Blum, W. J., Calkins, H., & Chetkovich, M. (1987). Tax Law., 41, 329.

Individual mandate and related information requirements under ACA, Mulvey, J., & Chaikind, H. (2012). Congressional Research Service.

The Effect of Tax Socialization, Tax Knowledge, Expediency of Tax ID Number and Service Quality on Taxpayers Compliance with Taxpayers Awareness as Mediating …, Savitri, E. (2015). Procedia-social and behavioral sciences, 211, 163-169.

Detection probability and taxpayer compliance: A review of the literature, Fischer, C. M., Wartick, M., & Mark, M. M. (1992). Journal of Accounting Literature, 11, 1.

Workers’ remittances: an important and stable source of external development finance, Ratha, D. (2005). Remittances: development impact and future prospects, 19-51.

Missing returns vs. missing income: Estimating the extent of individual income tax filing noncompliance from IRS and Census data, Erard, B., Langetieg, P., Payne, M., & Plumley, A. (2014). In B. Erard & Associates Working Paper.

 

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