Federal Identification Numbers

ITIN, SSN, or EIN – What Is the Difference?

On June 30, 2014, the Internal Revenue Service announced that effective immediately “Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years.” [IRS Newswire IR-2014-76] Does that mean that an individual's Social Security Number (SSN) or a business's Employer Identification Number (EIN) will expire if it is never used?

To answer that question, we have to know what an ITIN is and how it differs from a SSN or an EIN.

What Is a Social Security Number (SSN)?

A SSN is a nine-digit identifying number that is in the format xxx-xx-xxxx.

Any individual who is a U.S. Citizen, a permanent resident, or a temporary alien resident who is authorized to work in the United States, must have a SSN. According to the Code of Federal Regulations (CFR) every individual who is employed and receives wages must have a SSN, and every employer who pays an individual wages must obtain the employee's SSN and report the employee's wages using that number. [26 CFR 31.6011] Parents must also obtain a SSN for any child that the parent(s) claim on an income tax return.

SSNs are issued by the Social Security Administration (SSA), and anyone who is eligible to have a SSN may apply for one by completing Form SS-5. Any taxpayer with a SSN must use the SSN as an identifying number on his tax returns.

What Is an Employer Identification Number (EIN)?

Every business that pays employees or is required to file any business tax returns is required to obtain an EIN. An EIN is also a nine-digit number, but it is formatted as xx-xxxxxxx. EINs can be obtained from the Internal Revenue Service by following the instructions in IRS Publication 1635, Understanding Your EIN.

What Is an Individual Taxpayer Identification Number (ITIN)?

An ITIN is a tax processing number that is issued by the IRS for individuals who are not eligible for an SSN from the SSA, such as a foreign national or nonresident alien, but are required to file certain federal tax or information returns. Like a SSN, an ITIN is a nine-digit number in the format xxx-xx-xxx, but the first digit will always be a 9, and the second section of the number will be in the range of 70-88 (e.g., 9xx-88-xxxx). Since the program began in 1996 the IRS has issued over 21 million ITINs.

To obtain an ITIN an alien with foreign status should complete Form W-7, Application for IRS Individual Taxpayer Identification Number. By law, an alien individual cannot have both an ITIN and a SSN.

What Effect Does the IRS Announcement Have?

Since the program began in 1996, only about a quarter of the ITINs issued have been used on tax returns, which means the IRS has issued over 15 million ITINs that have never been used. In November 2012 the IRS announced that any ITIN issued after January 1, 2013, would automatically expire in five years and the taxpayer would have to apply for a new number. But this would have resulted in taxpayers who are foreign nationals, resident aliens, or nonresident aliens who have U.S. Tax obligations, would have to reapply every five years and file returns under different ITINs every five years.

Under the new policy any taxpayer who files a return using an ITIN at least once every five years will be able to retain that ITIN indefinitely. The IRS has also announced that it will not begin deactivating unused ITINs until 2016.

So what about those SSNs and EINs? They will never expire. So if you have one, it's yours forever.