In US, there exists different Tax Identification No. like Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Social Security Number (SSN) which can be used by persons having business established there. The Internal Revenue Service (IRS) make it a requirement to apply for these IDs for tax purposes. Non-Resident Aliens must know the difference between various Tax IDs to avoid any misperception and manage their businesses safely & smoothly. Below here, we discuss in detail about different Tax IDs and their use for a business.
EIN is the Tax ID mainly used by registered legal entities in US. Individuals are also identified by tax ID numbers like social security number (SSN) and Individual Tax Identification Number (ITIN) which are mainly used to identify US citizens and foreigners or non-residents.
Employer Identification Number (EIN)
An EIN which is also known as Federal Tax Identification Number is a 9-digit number that is issued by IRS (Internal Revenue Service) to the businesses operating in U.S. It is used for identification of the business and for tax purposes in U.S. Every business has a unique EIN having no expiration date. It does not get transferred or cancelled but can be closed by an application to IRS office.
The application to get an EIN can be submitted from anywhere. Form SS-4 is being used to apply for an employer identification number (EIN) and it will take 15-20 days to get an EIN.
Major reasons for applying EIN by foreign Entrepreneurs may be:
Advantages of having an EIN
To apply for EIN following information will be required:
Requirement of an EIN for an LLC
To complete Form 5472, An LLC owned by a Non-Resident Alien must first obtain an EIN. You must submit Form 5472 by paper or fax. The Non-Resident Alien -owned company must declare all reportable transactions on form 5472. A single-member (Non-Resident Alien) owned LLC is a Disregarded Entity for tax purposes, meaning that all income flows through to the owner. For the purpose of Form 5472 however, the LLC must file Form 5472 together with a pro-forma Form 1120 (usually used for corporations) by the due dates.
For more info on Forms to be submitted by foreign owned LLCs in US- Click Here
SSN (Social Security Number)
The SSN is an identification number for US citizens and permanent residents. SSN is required to receive payments or wages, register for voting, apply for loans, passport or driving license, open bank accounts, etc. SSN is issued for a lifetime and has no expiration. Government uses SSN to keep a track of an individuals’ employment history and earnings and determine their eligibility for benefits like Medicare and Social Security. Banks use SSN to verify credit of the applicant and employers use SSN to verify their eligibility to work in US or to report their income. To apply for SSN, visit the SSA official website and file form SS-5. For foreigners, an SSN is not required for essential services such as opening bank accounts, starting a business, etc.
ITIN
For non-residents, foreign nationals and undocumented immigrants, the ITIN is used to file an income tax return in the US. In practice, this documentation is for people who have some kind of residence or legal business work in the country to be able to declare their taxes. ITINs leading digit is always a “9”.
Form W-7 is used for ITIN Application. ITINs expire when not used on a return in the three most recent tax years.
In addition to the EIN, depending on the structure and organization of your company, LLC or C Corp, owners may be required to file their individual US income tax. Thus, it is necessary to obtain an ITIN to make the mandatory declarations as an individual in the United States.
A Green card holder may renounce or abandon their green card and US permanent residency status by completing the Form I-407 abandonment of lawful permanent residency status. After giving up a green card, you still need to file a final US tax return and include IRS Form 8854.
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