ITIN vs. EIN: Differences, Uses, and Who Needs Them

Your business is expanding, and you're now working with professionals all over the globe. Maybe you’ve finally found that perfect software engineer in Manila or are launching a new LLM dev team in Singapore. Now it’s time to navigate a world of tax codes and payroll acronyms (ITIN, EIN, W-9 ,1099). The next thing you know, someone asks, “What code do we really need?”

These tax identification numbers seem complicated and tedious. However, used correctly, they determine if you can hire employees in foreign countries, avoid penalties, and allow you to have a compliant international business that doesn’t trigger an IRS notice.

For employers who hire globally , understanding the differences between ITIN vs. EIN  has nothing to do with red tape. It's more about figuring out your business's operating system.

ITIN vs. EIN defined

The IRS issues both EINs and ITINs as specific types of tax identification numbers. But they are used for very different purposes and apply to certain types of individuals and groups.

ITIN: Individual Taxpayer Identification Number

An ITIN is essentially a tax ID for individuals who are required to file in the U.S. tax system, yet do not qualify for a Social Security Number (SSN). The ITIN can apply to a variety of situations, such as contractors in Buenos Aires who receive payment from your U.S. company; spouses of H-1B visa holders who need to complete a joint return; or other U.S. tax filing requirements for dependents and non-U.S. citizens.

The IRS created ITINs to collect tax revenue. However, the IRS recognized that many individuals who are not U.S. citizens or lawful permanent residents would require filing U.S. tax returns. An ITIN is a nine-digit number that begins with the number nine and resembles an SSN; however, it serves different purposes. There is no work authorization associated with the ITIN, and no entitlement to social security benefits. Its primary purpose is to facilitate tax compliance.

EIN: Employer Identification Number

Your EIN is like an SSN for your business. You will need an EIN if you have employees as a corporation or a partnership. Some solo proprietors may need an EIN even if they don’t have employees, as long as their business structure requires specific tax reporting or they hire contractors.

The IRS uses your EIN to identify your business in all of its interactions with the government, including withholding payroll taxes and filing annual returns. The EIN is listed on every employee’s W-2 upon hiring. Contractors receive a Form 1099 that includes their EIN. This is where the government can track your business activities and verify that you’re paying your share of taxes.

As a global employer, your EIN becomes the foundation for your business in the U.S. tax system. Using this EIN, you can withhold taxes, report income, and show proof of your legitimacy when doing business with banks, vendors, etc.

Key differences between ITIN and EIN

Here is a quick summary of what you need to know. It's not just who gets issued these two numbers that makes them different. They change how you hire people, how you pay them, and how much paperwork you'll have to deal with during tax season.

Who needs an ITIN?

You hire a talented contractor in Bangalore. Or you bring on a foreign investor who earns income through your U.S. entity. They need to file U.S. taxes for the money you're paying them, but they can't get an SSN. They're not U.S. citizens or permanent residents.

That's when the ITIN comes in. If you are a non-resident alien and need to file U.S. taxes, you need one. So do resident aliens who don't meet the IRS's substantial presence test and don't qualify for an SSN. Tax returns often need to show ITINs for dependents and spouses of U.S. citizens or visa holders. This also includes foreign investors who make money in the U.S.

What do they all have in common? Your employees or business partners have to pay U.S. taxes, but they don't need to fill out the usual forms to prove who they are to the IRS.

Who needs an EIN?

If you have employees, you need an EIN. Full stop. The IRS requires it for payroll tax reporting. Corporations, partnerships, and LLCs need one regardless of employee count because of how they're structured legally.

Sole proprietors exist in a gray zone. You might get by using your SSN if you're truly solo. But you need an EIN if you hire even one person. Want to start a business bank account or use a trade name? Most banks and other businesses will ask for one. It keeps your business and personal finances separate and makes you look like you mean business.

An EIN is a way to show you have permission to conduct business in the United States if you are not a U.S. company. It's necessary to work with U.S.-based clients, open an account with a U.S.-based bank, and remain compliant with IRS tax withholding requirements.

Common use scenarios

Theorizing about how things work is one thing. The reality of how they operate is another. Here’s a representation of where tax ID numbers will appear in real-life situations you will experience as you build out your global team or expand your U.S. business footprint.

When you need an ITIN

• Foreign contractor earning U.S.-sourced income. You hired a designer in Berlin who only works for your U.S. business. They need to fill out Form 1040-NR and tell the IRS about that money. That's possible with an ITIN.
• Foreign national investing in U.S. real estate. Your business partner from Singapore buys property in Miami to rent out. In the U.S., rental income is taxed. To file taxes and get deductions, they need an ITIN.
• Dependent spouse of a visa holder filing jointly. An H-1B worker wants to file a joint tax return with their spouse, who is on an H-4 visa. The spouse doesn't have an SSN, but they can get an ITIN so they can file together and maybe save money on taxes.
• Non-resident receiving treaty benefits.  A researcher from Canada works temporarily in the U.S. under a tax treaty. They need an ITIN to claim reduced withholding rates on their fellowship income.
• Estate or trust beneficiary. A foreign beneficiary inherits assets from a U.S. estate. They need an ITIN to report the income and handle tax obligations tied to that inheritance.

When you need an EIN

• Startup registering as an LLC. You're starting a business and creating an LLC. Most states and banks require you to have an EIN to do business legally, even if you're the only one right now.
• Global business hiring U.S.-based employees. Your business is based in London and wants to hire three people in New York. To withhold payroll taxes, file quarterly reports, and follow federal rules, you need an EIN.
• Foreign company opening a U.S. bank account. Your business in Australia needs a U.S. checking account so that you can work with American clients more easily. Before opening business accounts for foreign companies, banks need an EIN.
• Partnership or corporation formation. You and a co-founder are setting up your business as an S-Corp or a partnership. No matter how many employees these types of businesses have, the IRS requires them to have an EIN.
• Sole proprietor hiring their first employee. For years, you've been freelancing with your SSN. You need an EIN as soon as you hire an assistant or contractor and have to pay payroll taxes.

How to apply

Acquiring these numbers requires paperwork. But once you know what you're doing, the process is easy. The application process varies based on whether you need to identify a person or a business.

Applying for an ITIN

You’ll have to fill out IRS Form W-7. This form asks for basic information about your identity and whether you are a foreigner. But you can't just file it by yourself. You have to send it in with a completed tax return unless you meet certain exceptions, like claiming treaty benefits.

Where it gets cumbersome is providing original documents or certified copies that prove your identity and foreign status. Think of a passport, a national ID card, or a birth certificate. The IRS is very picky about this. You can send these papers straight to the IRS (which is scary, right?) or you can work with an IRS-approved Certifying Acceptance Agent who can check your papers.

It takes about seven weeks to process things in the US. If you're applying from outside the US, it will take nine to eleven weeks. You can't file your tax return until you have that ITIN, so make plans accordingly.

Applying for an EIN

This one is simpler. You fill out IRS Form SS-4 with basic information about your business's structure, ownership, and purpose. If you have your information in order, the form should only take about fifteen minutes.

People in the U.S. can apply online and get their EIN right away. Like, right there on the screen. The online system is not available to applicants from other countries. You can apply by fax or mail, or you can call the IRS international business line during certain hours. Fax applications usually take four business days to process. It takes about four weeks for the mail to get there.

Your EIN is yours indefinitely. You keep it for the lifespan of your business unless you completely close it down. No renewals. No expiration dates. Just keep it safe and use it on all of your tax documents.

Why this distinction matters

Understanding which tax identification number to use will be important for many reasons. Using an incorrect number can lead to delayed filings, rejected forms by the IRS, and potential IRS penalties. Acquiring the correct identification number for your company enables you to continue your global operations with no issues, and keeps both your company and your global employees in compliance with all applicable tax regulations.

With the growing trend of global hiring, the difference between ITIN and EIN is so much more than just paperwork. It's the foundation on which you'll be able to hire the best employee possible, wherever they’re located, without the tax system being a hurdle to overcome.

FAQs

These are the most common questions that employers and HR teams ask about ITINs and EINs.

Can one person have both an ITIN and EIN?

Yes. A foreign national might have an ITIN for filing their own taxes and an EIN for a business they started in the U.S. These are not in conflict with each other and serve different purposes. You could think of it as having two separate identities: one for your personal life and one for your business.

Can I use an ITIN instead of an EIN to start a business?

No. An ITIN is only for identifying your personal taxes. You need an EIN if you own a business with employees or are part of a corporation or partnership. There is no alternative to this.

Do I need an SSN to apply for an EIN?

No. Foreign nationals who don't have an SSN can still get an EIN by faxing or mailing in Form SS-4. You can still get a business tax ID even if you don't have an SSN. You'll just need to show other proof. The IRS has a special process for people who live outside the U.S.

Is an EIN the same as a business license?

No. The IRS uses an EIN as a federal tax identification number. Your local or state government gives you a business license, which lets you legally run your business in that area. You usually need both, but they do very different things.

Can I work in the U.S. with an ITIN?

No. An ITIN does not give you permission to work or allow you to work. It's just a number for processing taxes. To work legally in the U.S., you need the right work permits, like a visa and, eventually, an SSN.

Ensure payroll compliance with Pebl

When you hire people from other countries, it can be difficult to keep track of ITINs, EINs, and international tax obligations. Pebl's global EOR services and integrated payroll solutions handle these compliance details so you don't have to chase down tax IDs or worry about filing deadlines in multiple countries. We make it simple to hire, pay, and manage talent anywhere while staying compliant with U.S. and international tax requirements. Contact us to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free. 

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