A tax ID number from the IRS lets you meet federal filing requirements and unlock most of the everyday financial system: you can file federal and state tax returns, open bank accounts, build a credit history, take on freelance or contract work, form and run a business, and apply for loans and mortgages. The IRS issues two kinds that matter to most people. An Individual Taxpayer Identification Number, or ITIN, goes to people who need to file taxes but aren’t eligible for a Social Security Number. An Employer Identification Number, or EIN, goes to businesses, estates, and trusts. Which number you hold shapes which doors it opens.
What an ITIN Will Not Do
Before the uses, a boundary worth stating plainly. An ITIN is a tax-filing tool and nothing more. It does not authorize you to work in the United States, does not qualify you for Social Security benefits, does not change your immigration status, and cannot serve as identification outside the federal tax system.1Internal Revenue Service. Individual Taxpayer Identification Number (ITIN) It also does not make you eligible for the Earned Income Tax Credit.2Internal Revenue Service. Topic No. 857, Individual Taxpayer Identification Number (ITIN)
If your immigration status later changes and you become eligible for an SSN, the IRS can combine your ITIN tax records with your new SSN so prior payments still count.
File Federal and State Tax Returns
The core use is right in the name. Federal law requires every person filing a return to include an identifying number.3Office of the Law Revision Counsel. 26 USC 6109 – Identifying Numbers Individuals use an ITIN (or SSN) on Form 1040 to report personal income.4Internal Revenue Service. About Form 1040, U.S. Individual Income Tax Return Corporations use an EIN on Form 1120.5Internal Revenue Service. About Form 1120, U.S. Corporation Income Tax Return Most states that impose an income tax accept the same numbers on state returns.
Filing on time matters. The failure-to-file penalty runs 5% of the unpaid tax per month, up to a maximum of 25%.6Internal Revenue Service. Failure to File Penalty You can request an extension to October 15, but any tax you owe is still due in April.
Which Credits an ITIN Reaches
A frequent misconception: ITIN holders cannot claim the Child Tax Credit. To receive that credit, currently worth up to $2,200 per child under 17, both the taxpayer (or their spouse, if filing jointly) and each qualifying child must have a valid Social Security Number.7Internal Revenue Service. Child Tax Credit8Internal Revenue Service. Child Tax Credit FAQ
What ITIN holders can claim is the Credit for Other Dependents, worth up to $500 per qualifying dependent. A dependent qualifies if claimed on your return and holding an SSN, ITIN, or Adoption Taxpayer Identification Number.7Internal Revenue Service. Child Tax Credit The credit is nonrefundable, so it can zero out a tax bill but won’t generate a refund on its own. It begins phasing out at $200,000 in adjusted gross income, or $400,000 for married couples filing jointly.
Open a Bank Account and Build Credit
Banks are required to verify customer identities before opening accounts. Under rules implementing Section 326 of the USA PATRIOT Act, a bank must collect your name, date of birth, address, and a taxpayer identification number.9Financial Crimes Enforcement Network (FinCEN). FinCEN Order – Customer Identification Program An ITIN satisfies that requirement just as an SSN would, which means you can open checking and savings accounts at most major banks.
Interest-bearing accounts report earnings to the IRS, so a tax ID on file is essential for the bank’s reporting. Beyond deposits, an ITIN-linked account is the first step toward a credit profile with the major bureaus. Many banks offer secured credit cards to customers without an established credit history. These require a cash deposit as collateral and typically carry modest limits, but every on-time payment gets reported.
That reporting matters. A track record of consistent payments over 12 to 24 months can lead to unsecured cards with better terms, auto financing, and eventually mortgage eligibility. Without a tax ID on the account, none of that reporting happens.
Work as an Independent Contractor
Freelance and contract work runs through your tax ID. Before your first check, the business paying you will hand you a Form W-9, which collects your number so the payer can report what they paid you to the IRS.10Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification If payments reach $600 or more in a calendar year, the business files Form 1099-NEC reporting that income.11Internal Revenue Service. Form 1099-NEC Independent Contractors
Refusing to provide a valid tax ID is expensive. Without one, the payer must withhold 24% of your gross pay and send it to the IRS as backup withholding.12Internal Revenue Service. Backup Withholding You’d recover that money eventually after filing a return, but in the meantime you’re working with 76 cents on the dollar.
Quarterly Estimated Payments
Contractors don’t have taxes withheld from each paycheck, so if you expect to owe $1,000 or more for the year, the IRS wants quarterly payments rather than a single April payment.13Internal Revenue Service. Estimated Taxes The four due dates fall on April 15, June 15, September 15, and January 15 of the following year.14Internal Revenue Service. Publication 509 (2026), Tax Calendars
You can make estimated payments even before your ITIN arrives. Mail a check with Form 1040-ES and write “ITIN TO BE REQUESTED” where the form asks for your number.1Internal Revenue Service. Individual Taxpayer Identification Number (ITIN) Miss the quarterly deadlines and underpayment penalties, which function as interest, start accruing.
Start and Run a Business With an EIN
An EIN is the business equivalent of a Social Security Number. The IRS issues EINs to partnerships, LLCs, corporations, estates, trusts, and other entities that file federal returns or hire employees.15Internal Revenue Service. Employer Identification Number Applying is free and takes minutes through the IRS website.
Most states require an EIN (or a state-level equivalent) when you file formation documents such as articles of organization for an LLC or articles of incorporation for a corporation. State filing fees vary, generally between $50 and $500. An EIN also lets you open a business bank account, apply for business credit, and keep personal and business finances cleanly separated.
Payroll Tax Reporting
Once your business hires employees, the EIN becomes the backbone of payroll tax reporting. Employers file Form 941 quarterly to report wages paid, federal income tax withheld, and both the employer and employee shares of Social Security and Medicare taxes. Each return is due by the last day of the month following the quarter’s end: April 30, July 31, October 31, and January 31.16Internal Revenue Service. Instructions for Form 941
Federal unemployment tax is a separate obligation, reported annually on Form 940.16Internal Revenue Service. Instructions for Form 941 Missing payroll tax deadlines draws IRS enforcement quickly, and the penalties compound.
Get a State Driver’s License or ID
A number of states allow ITIN holders to apply for a driver’s license or state-issued identification card. Requirements vary, but you’ll typically need your ITIN, proof of state residency, and a foreign passport or other identification.
What’s issued is often a “limited-purpose” permit, valid for driving and daily identification but not accepted for federal purposes such as boarding domestic flights (which require REAL ID–compliant documents). Fees are generally the same as a standard license in that state. Check with your local motor vehicle agency before you go, since availability and documentation rules differ.
Apply for Loans and Mortgages
Some lenders offer mortgage products designed for ITIN holders. These loans typically require several years of ITIN-filed tax returns to verify income, along with a down payment near 20% of the purchase price. That runs noticeably higher than the 3% to 5% often available through conventional mortgage programs backed by an SSN and strong credit.
Interest rates on ITIN mortgages also tend to be higher, generally 0.5 to 2 percentage points above what a comparable conventional borrower would pay.17Urban Institute. ITIN Mortgages: Barriers and Opportunities to Advance Latino Homeownership On a $250,000 loan, one extra percentage point adds roughly $150 per month. The higher cost reflects the lender’s view of the risk, but for many borrowers this is the available path to homeownership.
Vehicle and personal loans work the same way. Lenders pull your credit report using the ITIN, review your filing history, and set terms based on the risk profile they see. The credit history you built earlier through bank accounts and secured cards directly shapes what rates you get. Skipping those early credit-building steps means paying significantly more in interest, or being turned down entirely.