What is an ITIN?
ITIN stands for Individual taxpayer identification number. It is a 9-digit number used for tax processing in the United States and issued by the Internal Revenue Service (IRS). It starts with the number 9 and goes up till 70 to 99, not including 89 and 93 in the fourth and the fifth digit. It is only used for reporting federal taxes and not for any other purpose. Basically this number is issued by the IRS to individuals who do not have a valid social security number nor are eligible to receive one. However it should be noted that getting an ITIN does not entitle a person to work and earn an income in the United States nor do they become eligible to obtain a U.S. social security number or the Earned Income Tax Credit. If you are wondering on how to apply for an ITIN, first you need to determine if you meet the eligibility criteria.
Facts about the ITIN
Misconceptions and myths regarding ITINs are aplenty; it is important to note down a few facts before you begin understand exactly how to apply for an ITIN.
- ITINs were created in July 1996 for the purposes of tax only, so that foreigners regardless of their migration status could pay taxes which they were required to legally.
- ITINs permit the IRS to bring in billions of dollars of revenue to the U.S. government, which they could not have in any other way.
- An ITIN does not grant an immigrant legal status nor is it a work permit.
- It allows more people to be a part of the U.S. tax system. For example, in 2010 the federal government earned over $870 million in income taxes from over 3 million people, using an ITIN.
- Illegal migrants contribute the most to the U.S. government. For example, in 2012 the tax that was collected ranged from $3.2 million in Montana to $3.3 billion in California.
- ITIN does not entitle a person to receive the same tax benefits as a U.S. citizen. For example, an ITIN holder cannot claim social security benefits or the Earned Income Tax Credit. (EITC)
- The ITIN is not used as a device or a tool to keep track of unauthorized migration. It is only used to allow people to pay their taxes on time.
- According to section 6103 of the Internal Revenue Code, the IRS is not permitted to release personal information of the taxpayers to other government agencies unless in the case of a court order related to a criminal investigation.
The Eligibility Criteria
As already stated before, an ITIN is provided to those who do not possess a social security number and neither qualifies for one; this includes.
- A resident alien in the U.S. (depending on the number of days stayed in the United States) filing a tax return
- A non-resident alien who is required to file a U.S. based tax return
- Any dependents or a spouse of the resident alien
- Any dependents or a spouse of the non-resident alien
- A foreign investor who has invested in the U.S. real estate market or a U.S. based business
- Real estate brokers who help unauthorized aliens with mortgages
If you fit any of the above mentioned categories, you are eligible to file a tax return based on the principles of the U.S. tax treaty and hence apply for an ITIN. This is necessary in order to claim a tax refund. If you are a non-resident alien, you should be aware of the fact that U.S. tax law prevents the IRS from sharing confidential tax information with other government agencies such as the department of homeland security, thus ensuring you that no procedures will be initiated by the mentioned department for removing you and your family.
You need to make sure that if you have applied for an SSN, you cannot apply for an ITIN. Legally, a person cannot have an SSN and an ITIN at the same time.
Benefits of Receiving an ITIN
There are many advantages of getting an ITIN. Before discussing on how to apply for an ITIN, read these benefits so that you know what you will be receiving.
1. You Can Pay Taxes
With an ITIN, you can easily file a tax return and eventually claim a tax refund. It also allows you to accomplish various legal matters and entitle you and your family to certain benefits. Without an ITIN, you are not authorized to pay taxes and this can lead to several legal entanglements. To avoid the hassle of going to the court every day, it is better to have an ITIN to notify the U.S. government that you are obeying their federal tax laws and contributing to the U.S. economy by filing tax returns.
2. You Can Open a Bank Account
Having an ITIN allows you to open an interest-bearing bank account in multiple banks across the United States. This helps boost the economy, especially after the global economic meltdown in 2008.
3. Child Credit Can Be Claimed
There was a myth that child tax credit could not be claimed with an ITIN and that it was only possible with an SSN (Social Security Number). This urban myth has now been debunked. With an ITIN, if a child of less than 17 years of age has resided with you for more than half of the present year, you are eligible to file for and claim child tax credit.
4. You Can Obtain Credit History
When you receive an ITIN, you are eligible to apply for a loan and a credit card. In this way, a credit history can be established which can prove to be very advantageous for you in the future. For example, an ITIN can help you change your immigration status when you are applying for a residency status in the U.S. plus it is much easier to later apply for an SSN as well. In the eyes of the U.S. law, you will be regarded as a law abiding citizen once you get your ITIN, and this can be very beneficial for you in the near future.
5. Document Your Employment History
An ITIN enables you to file for a tax return, which in turn is used to document your work history and your existence in the U.S. This in turn helps to prove to the authorities that you have lived and worked in the U.S. for a specific period of time and will eventually become entitled to citizenship status.
6. Receive Healthcare Coverage
If you are an illegal immigrant, got an ITIN and have children born in the U.S, they are qualified for healthcare coverage as stated in the ‘Affordable Care Act’.
7. No Withholding Tax
Immigrant workers, who receive a late payment because of a dispute with their employer, will not be liable to pay the highest withholding tax. But this is true in the case of having an ITIN. If an immigrant worker doesn’t have an ITIN, they are subject to high levels of withholding tax.
8. Get a Driver’s License
In some U.S. states, the ITIN can be used in place of an SSN to qualify for a driver’s license, state identification card or a driver’s permit.
Applying for an ITIN
Once you have understood the advantages and have fulfilled the eligibility requirements of obtaining an ITIN, you can submit the application for it either by mail, in-person or through an IRS acceptance agent. Whichever method you choose, the procedure of submission will remain the same. If you have decided to apply for an ITIN, then here’s how you can proceed.
1. By Mail
Firstly, ITIN applications cannot be submitted on the internet. Download and print the latest version of the W-7 form from the official website of the IRS. There are 8 boxes from ‘a’ to ‘h’ and you need to tick the correct box or boxes, to explain the reason for which you are submitting the W-7 form. As a general rule check the boxes ‘b’, ‘c’, ‘d’, ‘e’, ‘f’ or ‘g’ on the W-7, because you will be filing for a federal tax return as well. The W-7 records your biographical information. Non-resident aliens who are filling the W-7 should check the boxes ‘a’ and ‘h’ for tax treaty benefits. If you fill the W-7 incorrectly or check the wrong boxes, you might get a temporary ITIN. So make sure that you fill the W-7 form attentively. Here is a brief explanation for what each box means.
- Box ‘a’ is for a non-resident alien who wants to get an ITIN in order to claim a tax treaty benefit. This is valid for the residents of those countries with whom the U.S. has an income tax treaty. If you are going to check this box, make sure to check box ‘h’ as well.
- Box ‘b’ is for a non-resident alien who will be filing a tax return. This tax is compulsory to notify the IRS of an income, which is being generated from a business or a trade in the U.S. This box is also checked if an alien just wants a tax refund.
- Box ‘c’ is for those non-resident aliens who have been living and working illegally in the U.S. Although the USCIS has not given them permission to work, these individuals are still required to file a tax return.
- Box‘d’ is for the dependents of a U.S. citizen or a U.S. resident alien. These individuals are not eligible to receive an SSN. The dependents of U.S. military personnel are not needed to submit an original or a certified copy of their identification document.
- Box ‘e’ is for the spouse of a U.S. citizen or a resident alien. The spouse may or may not be a resident alien and is ineligible for an SSN but who is not subject to filing a tax return. The alien can also choose to file a U.S. tax return in a joint effort with their spouse. In such cases, this box needs to be checked.
- Box ‘f’ is for a non-resident alien professor, student or a researcher who has temporarily come to the U.S. to teach at a recognized educational institution, to attend a course or a degree or to carry out research. If this box is being checked, you need to submit your passport with a valid U.S. visa.
- Box ‘g’ is for the spouse or a dependent of a person holding a valid U.S. visa. Such individuals are dependent on a tax return but are not eligible to get an SSN. They have entered the U.S. with a non-resident person holding a U.S. visa. When checking this box, make sure to attach a photocopy of your visa with the W-7 form.
- Box ‘h’ is for situations that have not been described in the previous boxes. If any of the reasons mentioned through box ‘a’ to ‘g’ are not applicable to you, check this box and describe your reason in detail for requesting an ITIN. Remember to attach supporting documentation as well.
After that, you need to attach a valid federal tax return to the W-7 application along with a set of supporting documents such as your genuine proof of identity like a valid passport or certified copies of the like. Please note that the IRS no longer accepts notarized copies of the passport for an ITIN application; instead please ensure that you submit copies of your identifying documents which have been certified by the issuing agency of the IRS. The IRS also accepts original identification documents and has released a list of 13 documents that are accepted. These documents will be returned within 60 days of the processing of the W-7 form. The documents are listed below.
- A stand-alone passport
- Civil birth certificate (For dependents under 18 only)
- Foreign driver’s license
- National identification card (Photo, Name, Address, Date of birth, and expiration date must be visible)
- S. driver’s license
- S. State identification
- Foreign voter’s registration card
- S. military identification card
- Foreign military identification card
- S. citizenship and immigration services (USCIS) photo identification
- Medical records (For dependents under 6 only)
- School records (For dependents under 14 only, under 18 if a student)
You can then mail the completed application to the IRS. Since you are mailing your tax return form as an attachment to the W-7 form, don’t send it to the address listed in the form 1040A, 1040 (the tax return form; also known as the U.S. Individual Income Tax Return), or 1040EZ. Instead mail the W-7, the tax return and the original or certified copies of your proof of identity and foreign status documents to the following address.
Internal Revenue Service
Austin Service Center
P.O. Box 149342
Austin, TX 78714-9342
An application for obtaining an ITIN can be made anytime during the year; there is no restriction. However you have to make sure that the tax return is filed before its due date, otherwise you might be liable to pay a penalty.
Once your application is received, it will be verified and if you are eligible for an ITIN, a letter will be issued by the IRS containing your ITIN within a period of six weeks. If you don’t receive a letter within the allocated time, you can call the IRS hotline and inquire about the status of your application.
You can bring your completed W-7 form along with the tax return form and the required documentation to any IRS Assistance Center in the United States or an IRS Center abroad. Only an authorized IRS Taxpayer Assistance Center will be able to validate your national identification documents and your passport and return them on the spot. They will then send your application to the main IRS center in Austin, Texas for further processing.
3. Acceptance Agent
You can submit your application through a licensed acceptance agent. There is a list of IRS authorized acceptance agents, which can be found on the official website of the IRS. An acceptance agent can help you fill the W-7 form, verify the original documents as well as any certified copies of the identification documents and return them to you immediately. The agent will then attach a normal copy of the identification documents and a certificate of accuracy to the form W-7 and submit the application for an ITIN.
An ITIN can also be provided to dependents or to a spouse by sending the same valid tax return form along with the W-7 form for each dependent or a spouse, and the required identification documentation that supports their claim of holding a foreign status. As an alternative, these documents can also be submitted to some U.S. Consulates and Embassies for validation.
The recent policy of the IRS dictates that if an ITIN has not been used over a period of 5 years, they will expire. Therefore, it is essential to file a tax return so as to prevent them from expiring. If an ITIN expires, it will be reassigned.