Tax Identification Number (TIN)

A Tax Identification Number (TIN) is a unique identifier assigned by the IRS (or state taxing authority) used to identify taxpayers for tax administration purposes. In employment, the most relevant TINs are: Employee SSN (Social Security Number) for individual employees, Employer Identification Number (EIN/FEIN) used by businesses on all tax filings, and Individual Taxpayer Identification Number (ITIN) issued to individuals who are ineligible for an SSN but have US tax obligations.

An EIN (Employer Identification Number) : also called a Federal Employer Identification Number (FEIN) : is a 9-digit number assigned by the IRS to identify a business entity for tax purposes. Every employer with employees must have an EIN. It appears on all employer tax filings (Form 941, W-2/W-3, 1099s, FUTA), payroll records, and business tax returns. Employers with multiple locations may have one EIN for the entire organization or separate EINs for different entities : affecting payroll tax reporting structure.

Employees without an SSN: most employees have SSNs. Foreign national employees who are authorized to work may have SSNs. Some employees may have ITINs : these are for tax identification only, not work authorization (an ITIN alone does not establish work eligibility). HR must: complete I-9 verification using separate document verification, note that SSNs and ITINs are different numbers, work with payroll to ensure tax withholding is correctly set up, and consult immigration counsel for employees with complex tax and work authorization situations.

TIN matching is the IRS program allowing employers and payers to verify that a TIN (SSN for employees, EIN for businesses) matches IRS records before filing information returns. TIN mismatches : an employee name or SSN that doesn’t match SSA records : generate IRS notices requiring correction. Common causes: name changes after marriage/divorce not updated with SSA, data entry errors, or fraudulent SSNs. HR should verify employee SSNs through the Social Security Administration’s SSN Verification Service (SSNVS) to catch errors before W-2 filing.

IRS penalties for incorrect W-2s: $60 per W-2 with missing or incorrect TIN (SSN) filed on time but with errors; $120 per form if corrected after August 1; $310 per form for intentional disregard. The IRS sends CP2100 notices to employers with TIN mismatches in their filings, requiring ‘B notices’ be sent to affected employees requesting correct TINs. Persistent mismatches may require backup withholding. Annual SSNVS verification and careful data entry prevent most W-2 TIN issues.

New employer EIN process: apply online at IRS.gov/EIN (available immediately upon application), or apply via Form SS-4 by fax (4 business days) or mail (4-5 weeks). Needed information: legal name of entity, type of entity (LLC, corporation, etc.), reason for applying (new business), number of employees expected, first payroll date, and responsible party information. The EIN is required before running any payroll, opening a business bank account, or making federal tax deposits. State EINs for unemployment and withholding purposes require separate state registrations.