How To Understand Social Security & Other Tax ‘ID’ Numbers

by Lynnea Bylund on June 24, 2012 · 1 comment

An old Social Security cardSocial Security numbers, initially created by the Social Security Administration in November 1935, the numbers were issued to help administer Roosevelt’s New Deal Social Security program, otherwise known as the Social Security Act. The purpose of the Act – coming out of the Great Depression – was to provide benefits to retirees, the unemployed, certain children and the disabled.  As now, payments from the program were financed by a payroll tax on wages, half of which was withheld from an employee’s check and the other half of which was in the form of a contribution from the employer.

That framework has pretty much held steady throughout time with the exception of the Medicare piece which was tacked on in the 1960s.

Once upon a time  Social Security cards specifically stated that they were “not to be used for identification purposes.”  This was meant to allay fears in a post war society, of it being used as “national identification number.”  In the 1970s, that message was removed from the cards.

Nationally syndicated tax expert Kelly Phillips Erb (aka ‘TaxGirl’), at her Forbes blog just posted a great thumbnail guide to understanding the variations of Social Security and Tax ID numbers in their continued evolution —

“One of the first things that I remember about school was standing in line to get my schedule. The registrar asked me for my Social Security number and I stared at her blankly. She repeated her request and I was again silent. I remember distinctly her saying, in disbelief, “You don’t know your Social Security number?” I didn’t. Quite frankly, I had no need to know it. Despite how very popular it is today to use it for everything from credit card applications to library cards, there’s really only one reason to have a Social Security number: taxes.

Since the purpose of Social Security numbers was used to track wages and contributions, minors under the age of 14 weren’t initially required to have Social Security numbers (unless they needed it to file tax returns). As part of Reagan’s sweeping Tax Reform Act of 1986, the law was changed to require parents to list Social Security numbers for each dependent over the age of 5 for whom the parent wanted to claim a tax deduction. …

Today, a Taxpayer Identification Number (TIN) is required for the purpose of administering tax laws. Depending on the kind of TIN you require, the number is issued either by the Social Security Administration (SSA) or by the IRS: a Social Security number (SSN) is issued by the SSA whereas all other TINs are issued by the IRS.

Social Security numbers are available for U.S. citizens and for certain lawful aliens (generally, those authorized to work in the U.S.). To get a Social Security number, you will need to complete Form SS-5, Application for a Social Security Card (downloads as a pdf). Along with the form, you also must submit evidence of your identity, age, and U.S. citizenship or lawful alien status. …

If you aren’t eligible for a Social Security number, you might be eligible for an Individual Taxpayer Identification Number, or ITIN. This number is available to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs; this includes certain nonresident and resident aliens, their spouses, and dependents. ….

If you are in the process of legally adopting a U.S. citizen or resident child but cannot get a Social Security Number for the child in time to file your federal income tax return, you can apply for an Adoption Taxpayer Identification Number, or ATIN. An ATIN is a temporary number solely for the purpose of filing tax returns to claim a U.S. adopted child; it is not for use if the child is not a U.S. citizen or resident. …

If you have questions about which TIN is most appropriate for you, contact your tax professional. Do not simply ignore the TIN requirement since you may be missing out on tax or other benefits that you would be entitled to receive.


Comments on this entry are closed.

Previous post:

Next post: