What is a tax identification number?

A tax identification number is a unique code that a government tax authority assigns to a person or a business so it can track taxes. In the United States the main types are the Social Security number, the employer identification number and the ITIN. Other countries use their own formats.

How it works

A tax ID connects your income to your tax record. Tax agencies use it to match what you report with what payers report about you. You provide it when you open certain accounts, get paid as a contractor, or register as a business.

Common US types include:

• Social Security number (SSN). Issued to individuals who are eligible to work. Many sole proprietors use it for their business.
• Employer identification number (EIN). A nine-digit number the IRS assigns to businesses. See the EIN entry for details.
• Individual taxpayer identification number (ITIN). For people who need a US tax ID but cannot get an SSN.

Outside the US, formats differ. The UK has the Unique Taxpayer Reference and a separate VAT registration, and EU businesses have a VAT number for cross-border sales. A VAT number is not the same thing as a general tax ID, though it often sits next to one on an invoice.

On invoices, a tax ID helps the buyer’s accountant and proves who issued the document. Whether it is mandatory depends on the country and the invoice type, so check the requirements for your location. Our guide to what to include on an invoice lists the usual fields.

Example

A US freelance writer is hired by a new client, Brightline Media. Before the first payment, Brightline’s accounts team asks for a tax form.

Her invoices show her business name and address, and her EIN only if the client asks. Generate a clean layout with the invoice generator, which is free today.

Related terms

• EIN: the IRS identification number for businesses.
• VAT number: the registration number for value-added tax.
• VAT: the tax a VAT number relates to.
• Sales tax: the US consumption tax collected by sellers.