How to Get an ITIN Number

An Individual Taxpayer Identification Number (ITIN) is a unique number issued by the Internal Revenue Service (IRS) and is generally for individuals who need to file U.S. taxes but are not eligible for a Social Security Number (SSN).

What is an ITIN?

An ITIN is essentially a tax processing number. It is designed specifically for non-U.S. citizens, as they are not eligible for an SSN but still need to file taxes. It is a nine-digit number that looks like an SSN – they are formatted the same (XXX-XX-XXXX), but it does not give the holder the same benefits as an SSN.

ITINs are typically issued to foreign nationals who own U.S. businesses or have U.S.-sourced income and non-resident aliens who have not met the substantial presence test. Spouses and dependents of U.S. citizens or foreigners who have an SSN may also require an ITIN.

It is important to understand the differences between an ITIN, SSN, and an EIN.

• An SSN is issued to U.S. citizens and authorized noncitizen residents by the Social Security Administration (SSA). It is used for employment, collecting social security benefits, and identification.
• An EIN is also, confusingly, a nine-digit number. The IRS assigns this to business entities for tax purposes.
• An ITIN is solely used for federal tax reporting and doesn’t allow an individual to work in the U.S. or provide any social security benefits.

Note: An individual cannot hold an SSN and ITIN at the same time. If an individual gets an SSN after being issued an ITIN, they should use this SSN on all future tax filings.

Why would you need an ITIN?

The main reason for obtaining an ITIN is to file a U.S. tax return as a non-U.S. citizen. There are additional reasons why an ITIN might be necessary:

1. Obtain an EIN: If you are a non-resident business owner, you may need an EIN to file your business taxes.
2. Claiming tax treaty benefits: If you are a resident of a country that has a tax treaty with the United States, you may be eligible for reduced tax rates or exemptions on certain types of income.
3. Opening a U.S. business bank account: Most banks require an ITIN, EIN, or SSN when opening a business bank account. Holding an ITIN is useful for identification purposes.
4. Identification purposes: Some states accept ITINs as valid IDs. For example, some states accept ITINs when applying for a driver’s license.
5. Certain deductions and credits: Some deductions and credits, such as the Child Tax Credit or the Credit for Other Dependents, may be available to individuals who have an ITIN.

Case study

Imagine a Singaporean entrepreneur called Mei. She has established a Limited Liability Company (LLC) in Delaware. She conducts all of her business remotely but decided to form in the U.S. to add more clout to her business name. As a foreign business owner, Mei needs her company to comply with all U.S. tax laws. To do so, she needs to obtain an ITIN.

There are three reasons why Mei needs an ITIN:

1. To file a U.S. tax return as some of her clients are U.S.-based, meaning some of her income is U.S.-sourced.
2. To claim tax treaty benefits, as Singapore and the United States have a valid tax treaty. This can help reduce or eliminate certain taxes.
3. To open a U.S. business bank account. As some of Mei’s clients are based in the U.S., they prefer to pay in dollars instead of dealing with exchange rates and transaction fees.

How to apply for an ITIN?

Applying for an ITIN is an easy process. There are three main ways to apply for an ITIN:

1. Mail: The easiest and most common way to apply for an ITIN is to complete form W-7 (Application for IRS Individual Taxpayer Identification Number) and submit it with your tax return. Leave the SSN section blank on the tax return and attach form W-7 to the front. After the form has been processed, the IRS will assign an ITIN and process the tax return.
   • Mail the form W-7, tax return, and supporting documents to the Internal Revenue Service, ITIN Operation, P.O. Box 149342, Austin, TX 78714-9342.
2. IRS Taxpayer Assistance Center: You can also apply for an ITIN in person at an IRS Taxpayer Assistance Center. Schedule an appointment and bring your completed W-7 and additional supporting documents.
3. Certifying Acceptance Agent (CAA): A CAA is an agent that is IRS authorized to help with ITIN applications. They can verify foreign supporting documents and forward applications to the IRS on your behalf.

Required documents

1. Completed form W-7: Fill out the application carefully and accurately. Make sure to sign the form before submitting it. For additional help, read the Instructions for “form W-7” on the IRS website.
2. Original documents or certified copies proving identity: Provide documents like passports, birth certificates, or foreign ID cards. These must be originals or certified copies.
3. Tax return: As the main reason for applying for an ITIN, the application form W-7 should be attached to a tax return.

Processing time

After submitting an ITIN application, it can take several weeks or even longer for the IRS to process a request. It’s recommended to be organized and apply for an ITIN as early as possible to allow enough time for it to be processed before the tax filing due date.

Case study

Mei, who has an LLC in Delaware but has no other ties to the country, would file for her ITIN either by mail or by using a CAA. In this instance, a CAA might be more beneficial for Mei due to her international paperwork, and the agent can verify this for her. Mei should aim to get her W-7 form, tax return, and supporting documents in as early as possible to avoid any potential delays or mishaps that could result in financial penalties.

Renewing an ITIN

ITINs are not permanent. They will expire if they are not used on a federal income tax return for three consecutive years. If an ITIN has expired, it must be renewed before filing a tax return. The renewal process involves submitting a new Form W-7 along with the required documentation, identical to the initial application process.

If a tax return is filed with an expired ITIN, there may be a delay in the IRS processing your paperwork. This may lead to a delay in receiving a tax refund or lead to additional penalties.