Difference between Employer Identification Number (EIN) & Social Security Number (SSN)

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:

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.