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What is an ITIN?

In this article, I will explain you in a detail way, a very important topic for not only business owners, but also for any person that receives some kind of income in the U.S.

ITIN a2341

Individual Taxpayer Identification Number (ITIN)

An Individual Taxpayer Identification Number (ITIN) is a tax processing number the Internal Revenue Service (IRS) issues to an individual who needs to report income and file taxes but who do not qualify to obtain a Social Security number (SSN) from the Social Security Administration. The IRS will also issue ITINs to dependents who can be claimed on a tax return, but who do not qualify for social security numbers.

Like an SSN, an ITIN number is nine digits in the format xxx-xx-xxx. But the first digit will always be a 9, and the second section of the number will be in the range of 70-88 (e.g., 9xx-88-xxxx). Since 1996, the IRS has issued ITINs to taxpayers and their dependents who are not eligible to obtain a Social Security number (SSN).

Who’s eligible for an ITIN?

Any nonresident that has a U.S. source of income would need an ITIN from the IRS to file their United States tax return, as required by law. This means that a citizen from Mexico, who lives in Mexico, but has rental property in the United States, must file a tax return, using an ITIN, to report their rental income and expenses on a nonresident tax return.

If someone is in the U.S. on a temporary visa and his (or her) spouse accompanies him (or her) to the country, the spouse will need an ITIN in order for the couple to file a joint resident return in the U.S.

A U.S. resident (based on the days of presence test in the U.S.) who does not qualify for a Social Security number will need an ITIN to fulfill their U.S. tax reporting requirements.

ITINs allow taxpayers to stay in compliance with United States tax law. In some cases (such as claiming some dependent-connected tax benefits or filing jointly with a spouse), ITINs allow a taxpayer to benefit from tax rules that apply to all filers and not only to those with an SSN.

What ITINs don’t do

Taxpayers filing with an ITIN cannot claim the Earned Income Tax Credit, which requires a valid SSN. However, ITIN filers can claim the Other Dependent Credit for a dependent who has an ITIN and is a U.S. resident. If an ITIN filer has a dependent child with an SSN, they may be eligible to claim the Child Tax Credit and Additional Child Tax Credit.

Starting in 2015 both the taxpayer and qualifying child must have SSNs or ITINs by the due date of the tax return (including extensions) in order to claim the child tax credit and additional child tax credit. The same timing rule also applies to the Other Dependent Credit. If a taxpayer or qualifying child qualifies for an SSN or ITIN but waits to apply, the taxpayer may not be able to claim this credit, even if they are otherwise eligible. Also, the credit cannot be claimed later if the taxpayer or qualifying child gets an SSN or ITIN from the IRS after the due date of the tax return (including extensions).

How to get an ITIN _B4567

How to Get an ITIN?

To obtain an ITIN, you must complete IRS Form W-7, IRS Application for Individual Taxpayer Identification Number. W-7 requires documentation substantiating foreign/alien status and true identity for each individual. You can mail your documentation to the address shown in the Form W-7 instructions, present it at IRS walk-in offices, or process your application through an Acceptance Agent authorized by the IRS. Acceptance agents are entities (colleges, financial institutions, accounting firms, etc.) that are authorized by the IRS to assist applicants in obtaining ITINs.

No one should have both an ITIN and an SSN. For example, if an SSN application is pending, an ITIN will not be issued even if the individual completes and submits a Form W-7.

How long does it take to receive an ITIN?

Outside of peak processing times (between January and April), it should take up to six weeks for an applicant to receive their ITIN. However, because most ITIN applications must be filed with tax returns, they are typically filed during peak processing times. As a result, it can take 8 to 10 weeks to receive an ITIN. Any original documents or certified copies submitted in support of an ITIN application will be returned within 65 days. People who do not receive their original and certified documents within 65 days of mailing them to the IRS may call 1-800-908-9982 to check on their documents’ whereabouts.

After the ITIN application has been approved, the IRS will process the tax return within 6 to 8 weeks.

Who processes ITIN applications?

All ITIN applications are processed by the ITIN unit in the IRS Submission Processing Center in Austin, Texas. Tax returns attached to the ITIN applications are “sent for processing.” Tax examiners in the ITIN unit review ITIN applications and supporting documentation. Based on the tax examiner’s review, the application will be either:

Assigned — the IRS mails a notice with the assigned ITIN to the applicant;

Rejected — the IRS mails a notice informing the applicant (a) that the ITIN application was rejected, (b) the reason for the rejection and (c) that the applicant must file another application to reapply for an ITIN; or

Suspended — the ITIN application is suspended because of a procedural issue or because it has questionable information. (IRS guidelines define a questionable application as one for which the tax examiner identifies one or more discrepancies on the application. A procedural issue is one in which the applicant did not properly complete the application or did not attach the required documentation to the application.)

Why should business owners obtain an ITIN

Why Should Business Owners Obtain an ITIN?

The only real purpose that an ITIN provides entrepreneurs is federal tax reporting. These numbers do not serve any other purposes for business owners. This is still an important function to ensure your U.S. tax returns have been filed, so if you know you need an ITIN, it is recommended that you apply for the number as quickly as possible.

In short, an ITIN only has a few purposes, most of which center around staying in compliance with U.S. tax laws. According to the IRS, the shortlist of things one cannot do with an ITIN includes the following.

• Having an ITIN does not mean you are authorized to work in the United States.
• You will not be eligible for social security benefits just because you have an ITIN.

Why do undocumented immigrants need an ITIN?

In addition to being required to pay taxes, immigrants benefit from filing income tax returns because:

• It demonstrates that they are complying with federal tax laws.

• Filing federal taxes is a way for immigrants to further contribute to the economy.

• It is one way that people who may have an opportunity to legalize their immigration status and become U.S. citizens can prove that they have “good moral character.”

• Immigrants can use tax returns to document their work history and physical presence in the U.S. In order to be eligible for legal immigration status under any future immigration reform, people who currently are unauthorized to be in the U.S. most likely will have to be able to prove that they have been employed and have lived continuously in the U.S. for a certain number of years.

• People who file tax returns can claim crucial economic supports, such as the Child Tax Credit, including the refundable portion (also known as the Additional Child Tax Credit).

• Filing a tax return is required in order to be able to claim insurance-premium tax credits for family members—often U.S. citizen children—who are eligible for health care coverage under the Affordable Care Act (ACA, or “Obamacare”). These tax credits are necessary to help make health insurance affordable to people who otherwise would not be able to buy it.

• Individuals who are eligible to file their taxes with an ITIN can establish that they are eligible for an exemption from the ACA’s individual mandate, which requires that people have health insurance. Undocumented immigrants are excluded from all ACA benefits, so they are not eligible to buy health insurance through the ACA’s health care marketplace, even at full cost.

• Immigrant workers who receive settlement payments as a result of an employment-related dispute will be subject to the maximum tax withholding rate, unless they have an ITIN. For example, for a worker with an ITIN, the withholding on back wages paid to the worker because of a settlement will be based on the worker’s family status and the number of exemptions the worker can claim. By contrast, if the worker did not have an ITIN, the withholding would be figured as if the worker were single with no exemptions. Similarly, for workers without ITINs, the withholding on payments other than wages, e.g., on payments for punitive damages, is figured at the “backup withholding” rate of 28 percent, whereas workers who have ITINs ordinarily would have no withholding on such nonwage payments.

What is an ITIN not used for?

An ITIN does not authorize a person to work in the U.S. or provide eligibility for Social Security benefits. An ITIN does not provide a person with immigration status.

Is it safe to use an ITIN?

Generally, yes.
The IRS has strong privacy protections in place to ensure that immigrants who report their income and file their taxes are not at risk of having their information shared. Under Internal Revenue Code section 6103, the IRS is generally prohibited from disclosing taxpayer information, including to other federal agencies. However, certain exceptions apply.

For example, the IRS is required to disclose taxpayer information to certain U.S. Treasury Department employees when they request it for tax administration purposes or to other federal agencies if it’s needed for a nontax criminal investigation and a federal court has ordered that it be provided.Info Text

What documents must a person present when applying for an ITIN?

ITIN applicants are required to provide proof of their identity, foreign nationality status, and residency. (Proof must be submitted that any applicant claimed as a dependent resides in the U.S., unless they are from Mexico or Canada or are a dependent of U.S. military personnel stationed overseas.) In 2015, Congress codified the severe restrictions that the IRS had put in place on the types of documents that new ITIN applicants may present.

In order to apply for an ITIN, the applicant must

1- Complete a Form W-7, Application for IRS Individual Taxpayer Identification Number, along with their federal income tax return, and

2- Prove their identity and foreign nationality status by providing a combination of original documents (see the table below) or certified copies of the documents. (A certified copy is one that the original issuing agency provides and certifies as an exact copy of the original document and that contains an official stamped seal from that agency. Notarized copies are not acceptable.)

The IRS will accept only a combination of the 13 documents listed in the table below as proof of identity and/or foreign nationality status. Applicants who can present a passport have to present only one document. Otherwise, they will need to present at least two documents or certified copies of at least two documents.

Document that proves both identity and foreign status Documents that prove only identity Documents that prove identity or foreign status (not both)
PassportDriver’s license issued in the U.S.U.S. Citizenship and Immigration Services photo identification
Foreign driver’s licenseVisa issued by the U.S. Department of State
Identification card issued by a state within the U.S.Foreign military identification card
U.S. military identification cardNational identification card (must be current and include photo, name, address, date of birth, and expiration date)
Foreign voter registration card
Civil birth certificate
Medical records (only for dependents under age 6)
School records (only for dependents under age 14 or under age 18 if a student)

CONCLUSION:

ITINs are issued regardless of immigration status because both resident and non-resident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code.

Do you need help getting your ITIN? You can obtain an ITIN Number by completing Form W-7 and mailing it to the IRS. Alternatively, you can contact one of the ITIN acceptance agents listed by the IRS for assistance. There are agents available within the U.S. as well many countries internationally.

At Castillo Tax Service we can help you with that.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.

It's a Social Media and digital marketing consultant and owner and founder of LFStudio.com. He is also author and entrepreneur. He helps small businesses to grow, get clients and generate income.

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