Exploring the complexities of U.S. tax laws means getting a clear understanding of key elements, including the Individual Taxpayer Identification Number (ITIN). Let’s dive into the basics.
What is an ITIN?
The IRS defines an ITIN as a tax processing number given to individuals who require a U.S. taxpayer identification number but can’t get a Social Security number (SSN) from the Social Security Administration (SSA).
Purpose of an ITIN
The IRS issues ITINs to facilitate compliance with U.S. tax laws and streamline the processing and accounting of tax returns and payments for those without SSNs. ITINs are issued irrespective of immigration status, serving the sole purpose of federal tax reporting.
What an ITIN Does Not Do
Contrary to common misconceptions, an ITIN does not authorize work in the U.S., confer eligibility for Social Security benefits, or qualify a dependent for Earned Income Tax Credit purposes.
Who Needs an ITIN?
Foreigners need an ITIN if they have a federal tax filing requirement or informational reporting requirement and do not qualify for an SSN.
Distinguishing ITIN, EIN, and SSN:
For a detailed breakdown of the differences between ITIN, Employer Identification Number (EIN), and SSN, refer to our comprehensive blog post here.
How to Obtain an ITIN:
Unless eligible for specific exceptions, you must fulfill certain criteria and submit necessary documents:
- Have a tax filing requirement in the U.S.
- File a federal income tax return
Application requirements include the IRS Form W-7, a U.S. federal income tax return (with assistance from a specialized accountant), and proof of foreign status and identity (commonly satisfied with a passport).
Exception for LLC Owners:
Generally, the ITIN application aligns with your tax return. However, there’s an exception (Exception 1(a)) for individuals who are partners in a U.S. or foreign partnership investing in the U.S. Documentation, including the partnership or LLC agreement, is required.
Completing Form W-7:
While we strongly advise seeking professional assistance to avoid errors, you can find instructions and download Form W-7 directly from the IRS here.
Submitting the Application:
Submission methods include mail, private delivery services, in-person visits to IRS Taxpayer Assistance Centers, or through designated acceptance agents (AA or CAA).
Why Work with a Professional
Given the complexity and potential pitfalls, collaborating with a professional accountant, particularly an IRS Acceptance Agent, is highly recommended. Mistakes on Form W-7 may lead to IRS rejection.
Processing Time for ITIN
The IRS provides a timeframe for processing based on application submission dates. It generally takes 7-8 to 10 weeks if applying between January 1st and April 30th, and 7 weeks for applications submitted between May 1st and December 31st.
