This article gives details on SSNs for employers and sole proprietors so they can comply with Internal Revenue Service (IRS) and Social Security Administration (SSA) regulations.
Social Security Numbers vs. Tax ID Numbers
A Social Security number (SSN) is just one form of taxpayer ID number. An employee may have one of several other identifiers:
Individual taxpayer number (ITIN): Given to individuals who don’t have, or aren’t eligible for, an SSN Employer Identification Number (EIN): Given to someone who is not an individual, and individuals who have employees or are in business as a sole proprietor
SSNs for Single-Owner Businesses
Most business types need an EIN, but sole proprietorships use the owner’s SSN as their business identifier because this business type isn’t considered separate from the owner. A one-owner limited liability company (LLC), which is normally taxed like a sole proprietorship, can also use the owner’s Social Security number as the business identifier in most cases. Sole proprietors and single-member LLCs must use an EIN, not their SSN, if the business has employees or it must pay excise taxes.
SSNs for Employee Verification
New employees may need SSNs to verify that they are eligible to work in the U.S. and for federal tax purposes.
Work Verification for Immigration Purposes
Employers must use Form I-9 from the U.S. Citizenship and Immigration Service to verify employee identity and their authorization to work in the U.S. Social Security cards are just one type of documentation for this purpose. A new hire can use a Social Security card or another type of document (Class B document) to verify employment authorization. They must also provide another document (Class C document), to establish identity. A Social Security card doesn’t have a photo on it, so there’s no way to verify identity with this card. You must examine the documents and note on Form I-9 which documents you looked at.
Work Identification for Tax Purposes
All new hires must complete Form W-4 before receiving their first paycheck, and they must include their SSN on the form. The IRS does not allow employers to accept an individual tax identification number (ITIN) for employee work identification. An ITIN is used only for tax processing purposes for certain individuals who can’t get an SSN.
Employer Correction Request Letters
Employers sometimes receive a letter in the mail called an Employer Correction Request for missing or incorrect SSNs from the Social Security Administration. The information may have been given incorrectly by the employee on their W-4 form or it was entered incorrectly on the W-2 form. Don’t take any action against the employee. Laying off, suspending, firing, or discriminating against the employee could be a violation of state or federal law. To correct the error, you’ll need to register with the Social Security Administration’s Business Services Online system. Then follow the instructions in the letter to make the correction.
How can I verify an employee’s Social Security number?
You can verify an employee’s SSN by signing up for SSN Verification through the SSA’s Business Services Online portal. You can also use the portal to correct any errors. It can only be used to verify current or former employees and only for wage reporting (Form W-2).
Can an employer require a Social Security card?
For verification of employee work eligibility for Form I-9, the Social Security card isn’t required specifically. It’s just one in a list of possible forms of verification. For use on the employee’s W-4 form for tax withholding, an SSNN is required. The employee isn’t required to show you their Social Security card. If the employee shows you their card, you can copy it for your records.
Can I hire someone who doesn’t have a Social Security number?
It’s legal to hire someone who claims not to have a Social Security card or who doesn’t remember their SSN, but you as the employer are legally liable if the SSN on the employee’s W-2 form is incorrect or missing. Urge the person to apply for an SSN or replacement Social Security card as soon as possible using SSA Form SS-5.
How do I know if a card is a social security card or an ITIN?
The ITIN is a nine-digit number formatted like the SSN. An ITIN will start with the number “9” and have a range of numbers from “50– 65,” “70–88,” “90–92,” and “94–99” for the fourth and fifth digits.