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June 14, 2023
Difference between Employer Identification Number (EIN) & Social Security Number (SSN)
Table of Content
Introduction
When starting a business or hiring employees, there are legal obligations to fulfill, and obtaining the necessary identification numbers is among them. Two commonly used identification numbers are the Employer Identification Number (EIN) and the Social Security Number (SSN). Although they may appear similar, these numbers have distinct purposes and are issued by separate government entities such as the Internal Revenue Service (IRS) and the Social Security Administration (SSA). In this article, we will explore the difference between EIN & SSN.
What is an Employer Identification Number (EIN)?
An EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify businesses for tax purposes. It is also known as a Federal Tax Identification Number (FEIN). Every business that pays employees or is required to file tax returns must have an EIN. The EIN is used to identify the business on tax documents, including income tax returns, payroll tax returns, and other forms related to employer tax obligations.
What is a Social Security Number (SSN)?
An SSN is a unique nine-digit number issued by the Social Security Administration (SSA) to individuals for tracking their earnings and paying Social Security benefits. It is also used to verify a person’s identity for employment, credit, and other purposes. Every individual who works in the United States is required to have an SSN, and it is often used as a form of identification in various contexts.
The key difference between EIN and SSN
Here are eight key differences between EIN and SSN in a tabular format:
|
Basis of Comparison |
Employer Identification Number |
Social Security Number |
|
Issued by |
It is issued by a government agency named Internal Revenue Service (IRS). |
It is issued by a government agency named Social Security Administration (SSA). |
|
Purpose |
The purpose of issuing an Employer Identification Number (EIN) is to identify a business entity for tax purposes and is used by the IRS to track and verify the company’s tax reporting and payments |
SSNs are used for employment and Social Security benefits, they may also be required for other purposes such as applying for government benefits, opening a bank account, or obtaining a driver’s license. |
|
Usage |
It is used for tax reporting and filing business returns. |
It is used for employment, credit, and other purposes. |
|
Requirement |
It is required for businesses registered in the US. |
It is required for individuals who work as an employee in the US. |
|
Application |
Businesses can apply for an EIN online through the IRS website, or by fax, mail, or phone. The application process is free, and the EIN is usually issued immediately upon completion of the application. |
Individuals can apply for an SSN by filling out an application form and submitting it to the SSA, along with required documents such as a birth certificate, passport, or other identification. |
|
Unique Number |
Each business entity has a unique EIN |
Each individual has a unique SSN |
Summary
In summary, while EIN and SSN may share some similarities, they are distinct numbers issued by different government agencies for different purposes. EINs are used to identify businesses for tax purposes, while SSNs are used to track earnings and pay Social Security benefits to individuals. It is essential to understand the differences between these two numbers and ensure that they are used appropriately to avoid legal and financial consequences.
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