Introduction to ITIN or Individual Tax Identification Number
ITIN or Individual Tax Identification Number is a type of Taxpayer Identification Number (TIN) that is assigned by the Internal Revenue Service (IRS). The ITIN was actually created in 1996 to help individuals without a social security account to file tax returns in the country. This article has been created to impart information pertaining to what ITIN is; ITIN number application, it’s importance, how to apply, and the renewal process.
The Individual Tax Identification Number (ITIN) is an important tax processing number assigned by the IRS to individual resident or non-resident aliens in the US. The number is issued to ensure such individuals are able to comply with U.S. tax laws. An individual will be required to submit correctly filled ITIN number application to get the number from IRS.
What is ITIN or Individual Tax Identification Number?
The Individual Taxpayer Identification Number (ITIN) is a unique nine-digit US tax processing number issued by the Internal Revenue Service (IRS). An ITIN number is issued to individuals who are not eligible for obtaining a U.S. Social Security Number (SSN) but are still required by the law to file Individual Income Tax Return. Such individuals will be required to file an ITIN number application. The Individual Tax Identification Number is issued regardless of the type of immigration status an individual has because both non-resident and resident aliens may have U.S. reporting requirements under the Internal Revenue Code.
You will be required to submit an ITIN number application if you fall in any of the below mentioned categories:
- If you are an U.S. resident alien planning to file a U.S. tax return based on the number of days present in the country
- If you are a Non-resident alien and are required by the IRS to file a U.S. tax return
- If you are a spouse or dependent of a U.S. resident alien
- If you are a spouse or dependent of a non-resident alien visa holder
- If you are a non-resident alien or foreign business investor claiming tax treaty benefit
- If you are a non-resident alien student, researcher or professor claiming an exception or filing a U.S. tax return
In 2012, the IRS released a notification stating that once you receive this tax ID number, it has to be renewed every 5 years. The IRS amended the notification several times and in 2016, it stated that these numbers will expire automatically if not used within a period of 3 years and you will be required to apply for ITIN renewal in such a scenario.
Why is ITIN important?
The importance of ITIN lies in the understanding of who this tax ID is meant for. If you are not a U.S Citizen or are a resident alien but are planning to work or gain employment of some form in any of the states in the U.S then you will be required to submit an ITIN number application in order to be compliant with the tax laws of the country. Unlike Employer Identification Numbers (EIN), which is meant for businesses domestic and foreign, an Individual Tax Identification Number is meant only for individuals and not businesses.
It is important to submit ITIN number application as it will facilitate the following:
- An Individual Tax Identification Number lets resident and non-resident aliens or citizens file their tax returns thus paying into the system. This helps in building a tax base.
- It allows recipients of stipends and those individuals who have any form of taxable scholarships to file their returns
- Specific ITIN holders will be eligible for the Child Tax Credit (CTC). Depending on the income of the CTC applicant, you can avail a maximum CTC tax credit of $2,000 per qualifying child.
- Once you submit an ITIN number application and obtain the number, it can be used as a proof of residency. There are times when immigrants are required to prove how long they have been staying in the US and tax returns filed using ITIN can be a proof of that. An Individual Tax Identification Number can be used for opening an interest-bearing bank account. This is valid for those individuals who don’t possess a Social Security number (SSN).
- You may be a foreign student or citizen in the US but you can secure a driver’s license with the help of the ITIN number. It can be used in specific states to receive a driver’s permit, or even a state identification card.
It is also important to note that an Individual Tax Identification Number (ITIN) is not a tool for authorizing work in the US or for defining eligibility for any Social Security benefits. If you have a SSN then you are not required to file an ITIN number application.