The IRS, or Internal Revenue Service, keeps track of the money earned by individuals and businesses in the United States. It tracks income by an identifying number, typically your Social Security number -- a number assigned to individuals -- or Federal Tax ID number, also called an Employer Identification Number (EIN) -- assigned to businesses or organizations. By tracking your income with this number, the IRS can calculate how much you or your business owes in taxes.
Social Security numbers are assigned by the Social Security Administration. The original and main purpose of Social Security numbers, since the inception of the program in 1936, has been to track your individual Social Security account. This was a requirement of the Social Security Act. Signed into law in 1935, it was originally a program to provide retirement income for American workers once they reached age 65. Social Security numbers have been used since this time to identify individuals and track income for reporting taxes, banking and credit. Federal Tax ID numbers are assigned to businesses, organizations and entities by the IRS. The purpose of a Federal Tax ID is to track revenue -- or income -- that a business receives, as well as expenses, such as payments made to employees or contractors.
Social Security Numbers
Social Security numbers can be ordered along with a baby's birth certificate. There are three types of Social Security numbers issues. One is for U.S. citizens and people who are legally able to live and work in the U.S. permanently. The other two types of Social Security cards are for people from other countries who are able to work with permission from the Department of Homeland Security and those who are not able to work. Social Security numbers have nine digits, which are broken up into three parts. The first three digits identify where the card was issued, which is typically where the individual lives. The next two digits were originally for filing information. The final set of numbers have four digits, which are the person's individual identifying numbers.
Federal Tax IDs
Federal Tax ID numbers are also nine digits, though they are broken down in two sections. The first two digits indicate the office that issued the number, while the remaining seven digits are the business identification numbers. Neither Social Security numbers or Federal Tax IDs are even reissued.
Your personal information, such as your name and your age, are attached to your Social Security number. Keep this number private and only share it when necessary, such as with government agencies. In contrast, Federal Tax ID numbers are typically readily available, as a company must share that number with employees, contractors and anyone else who may need the number for their own business or tax purposes.
- Internal Revenue Service: Employer ID Numbers (EINs)
- Internal Revenue Service: Taxpayer Identification Numbers (TIN)
- Business.gov: Employer and Tax Identification Numbers
- Social Security Administration: Social Security Numbers
- Social Security Administration: Types of Social Security Cards
- Social Security Administration: History: Social Security Number Pamphlet From 1953
- Negative Tax Consequences for the Self-Employed
- Can a Wife Receive Social Security Benefits Based on Her Husband's Work History?
- What Could Undermine My Retirement?
- What Is Considered Earned Income With Social Security Benefits?
- A List of the Federal Taxes Withheld From Most Employee Paychecks
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- When Can I Stop Paying Social Security Tax?
- Do I Get a Refund on Social Security Taxes That Are Withheld?
- Do I Pay State Taxes on Social Security Benefits?
- How to Change Social Security Tax Exempt Status