A tax ID number is how the IRS identifies you for tax purposes

A tax ID number is a nine-digit identifier the Internal Revenue Service uses to track your tax records. If you work as an employee, you have a Social Security Number (SSN), which serves as your tax ID. If you own a business or operate as a sole proprietor, you may need an Employer Identification Number (EIN) instead — or in addition to your SSN.

The IRS uses your tax ID to match income reports from employers, banks, and clients to your tax return. Without one, you cannot file taxes, claim refunds, or open a business bank account. The type of tax ID you need depends on how you earn income and the structure of your business.

Key Takeaways

  • Employees use their Social Security Number as a tax ID; business owners typically need an Employer Identification Number (EIN) in addition.
  • An EIN is a nine-digit number issued free by the IRS and takes about 15 minutes to obtain online.
  • You need a tax ID to file a tax return, receive a refund, hire employees, or open a business bank account.
  • Sole proprietors can use their SSN for business taxes, but an EIN keeps personal and business finances separate on IRS records.

Social Security Number versus Employer Identification Number

Your Social Security Number is issued by the Social Security Administration and works as your tax ID if you are an employee. Your employer reports your wages to the IRS using your SSN. When you file your personal tax return, you use your SSN to connect your return to the income the IRS already has on file.

An Employer Identification Number (EIN) is a separate nine-digit number the IRS issues to businesses. You need an EIN if you operate as a partnership, corporation, LLC, or S-corp. Even sole proprietors — people who run a business alone — can get an EIN to keep business and personal income separate on IRS records, though it is not required.

The difference matters because the IRS tracks business income separately from personal income. If you have employees, a business bank account, or file business tax forms like Schedule C, you will need an EIN. If you are only an employee receiving a W-2, your SSN is sufficient.

When you need an EIN

You need an EIN if you hire employees, even one. The IRS requires you to have an EIN before you put someone on payroll. You also need one if you operate as a partnership, LLC, corporation, or S-corp — the business structure itself triggers the requirement.

You may want an EIN even if you are not required to have one. Sole proprietors who work as independent contractors often get an EIN to keep business and personal finances separate. This makes bookkeeping easier and protects your SSN from being shared with multiple clients. Some banks require an EIN to open a business account, even for sole proprietors.

You do not need an EIN if you are a sole proprietor with no employees and you report business income on your personal tax return using Schedule C. In that case, your SSN is your tax ID for both personal and business purposes.

How to get an EIN

The IRS issues EINs free of charge. The fastest way is to explore online at the IRS website using Form SS-4. The online process takes about 15 minutes, and you receive your EIN when ready after you submit it. You can then use the number right away.

If you cannot explore online, you can mail Form SS-4 to the IRS address listed on the form, or fax it. By mail, the process takes about four weeks. By fax, it typically takes two to three weeks. You can also call the IRS Business and Specialty Tax Line, though wait times are often long.

You only need to explore once. The IRS does not reissue EINs. If you lose your number, you can look it up by contacting the IRS or checking old tax documents.

What the IRS does with your tax ID number

The IRS uses your tax ID to build a file of your income and tax history. When your employer files a W-2, they report your wages using your SSN or EIN. When a client pays you as an independent contractor, they report the payment using your tax ID on a Form 1099. Banks report interest income using your tax ID on a Form 1099-INT.

When you file your tax return, the IRS matches the income reported to you against the income you report on your return. If they do not match, the IRS may send you a notice asking for an explanation. Your tax ID is also used to track any refunds owed to you and any taxes you owe.

The IRS also uses your tax ID to enforce tax law. If you owe back taxes, the IRS can use your tax ID to place a lien on your property or garnish your wages. If you are behind on child support or student loans, other agencies can use your tax ID to locate you.

Protecting your tax ID number

Your tax ID number — whether it is your SSN or EIN — should be treated like sensitive information. Do not share it with people you do not trust. Criminals can use your SSN to file a false tax return in your name and claim a refund, a crime called tax identity theft.

If you use your SSN for business, consider getting an EIN instead to limit how many people and organizations have your SSN on file. If you believe your tax ID has been compromised, contact the IRS Identity Theft Hotline at 1-800-908-4490 or file a report on the IRS website.

Frequently Asked Questions

Can I use my Social Security Number as my business tax ID?

Yes. As a sole proprietor with no employees, you can use your SSN to file business taxes. However, many sole proprietors get an EIN instead to keep business and personal finances separate and to avoid sharing their SSN with clients and vendors.

How long does it take to get an EIN?

Online applications are processed when ready — you receive your EIN as soon as you submit the form. Mail applications take about four weeks. Fax applications typically take two to three weeks. The IRS does not charge a fee.

Do I need a tax ID if I am self-employed?

Yes. If you are self-employed, you use your Social Security Number as your tax ID unless you have employees or operate as a business entity like an LLC or corporation, in which case you need an EIN. Either way, you must have a tax ID to file your return.

What happens if I do not have a tax ID?

Without a tax ID, you cannot file a tax return or receive a refund. If you are an employee, your employer cannot report your wages to the IRS. If you are self-employed, you cannot legally operate a business or hire employees.

Can someone steal my tax ID number?

Yes. Tax identity theft occurs when someone uses your SSN to file a false tax return and claim your refund. If you suspect this has happened, contact the IRS at 1-800-908-4490. You can also file a report on the IRS website or place a fraud alert with the credit bureaus.