Navigation

TM

702-871-8678

How do I obtain an Individual Tax Identification Number (ITIN)?

If you are residing outside the USA and want to start a business here then there are several business legalities that have to be considered including submission of an ITIN number application. The process of establishing a new business may be a little demanding for a non-resident or a foreign national as there are only specific forms of businesses that foreigners can invest in. Since there are certain restrictions in the area of foreign ownership in different types of business entities, the most common type of entities chosen are LLCs and C Corporations.

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:

  1. 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.
  2. It allows recipients of stipends and those individuals who have any form of taxable scholarships to file their returns
  3. 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.
  4. 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).
  5. 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.

Applying for ITIN

If you are a student visiting the US on a fellowship, scholarship or grant and it includes an income that is considered to be taxable then you will be required to submit an ITIN number application. This also stands true for both U.S. resident aliens and non-resident aliens that don’t have a Social Security number (SSN) but have to file U.S. tax returns. Hence, it is important to know the correct ITIN application process as the IRS has updated the procedures.

How do I apply for ITIN?

You will have to apply for an Individual Tax Identification Number (ITIN) with the IRS. There are certain documents required along with the ITIN number application. The following steps will help you in understanding the application process.

  • Step#1: You need to complete and submit the IRS Form W-7 (Application for IRS Individual Taxpayer Identification Number).
  • Step#2: You have to submit documents pertaining to proof of identity and foreign status. These documents have to be submitted along with the ITIN number application. You need to ensure the documents being submitted are current and have an expiration date. Some of the documents accepted by IRS as proof of identity include Passport, U.S. driver’s license, Foreign driver’s license, A U.S. federal income tax return, National identification card, Visa, Foreign voter’s registration card, and U.S. Citizenship and Immigration Services (USCIS) photo identification among others.
  • Step#3: Once all the necessary documents are in place, you can mail the ITIN number application along with the documents to Internal Revenue.

You can also apply for an Individual Tax Identification Number by taking an appointment at any of the designated IRS Taxpayer Assistance Centers or in-person by using the services of any IRS-authorized Certifying Acceptance Agent.

How long does it take to receive my ITIN?

Once you have submitted your ITIN number application along with the necessary documents as proof of identity and foreign status, the IRS will process your application. If you qualify for an ITIN then the IRS will mail you a letter with the assigned tax identification number within a period of seven weeks from the date of submission.

Renewing your ITIN

An Individual Tax Identification Number (ITIN) assigned by the Internal Revenue Service (IRS) comes with an expiration date. Earlier the expiration date was 5 years if the ITIN is not used for filing returns and now it is 3 years. If you don’t use your tax ID number for filing returns within a period of 3 years from the date of issuance then you will be required to apply for ITIN renewal. According to the IRS, the number of Individual Taxpayer Identification Numbers (ITINs) that expired in 2018 was in excess of 2 million.

Do I need to renew ITIN?

There are specific criteria that define the need for ITIN renewal. You need to consider the following aspects as they will determine whether you will be required to opt for a renewal of the tax ID number. The considerations are:

  • If you receive a notice from the IRS stating that you or your spouse or dependent Individual Tax Identification Number (ITIN) is scheduled to expire then you need to apply for ITIN renewal.
  • If you have not used your ITIN for filing any returns in the last 3 years then you need to opt for renewal as your ITIN will expire automatically.
  • If you own an Individual Tax Identification Number with the middle digits being 73, 74, 75, 76, 77, 81 or 82 e.g., 9XX-77-XXXX then it needs to be renewed even if you have used it for filing returns in the last three years.

How do I renew my ITIN?

The process of ITIN renewal is quite similar to that of applying for a new ITIN. In order to renew your Individual Tax Identification Number, you will be required to complete IRS Form W-7 and submit it to the IRS along with all necessary identification documents. You will not be required to submit a federal tax return. There are three methods for submission of renewal documents and they are:

  • Mail: You can mail the W7 form along with identification documents to the Internal Revenue Service. The identification documents will be returned by the IRS after reviewing within a period of 60 days.
  • Certifying Acceptance Agents: You can opt for ITIN renewal in-person by working with IRS authorized Certifying Acceptance Agents (CAAs). The role of a CAA is to authenticate your identification documents and can also ensure the ITIN application being submitted is correct. This option will save you from mailing your original identification documents to the IRS.
  • Taxpayer Assistance Center: You can also opt for ITIN renewal through the services provided by a Taxpayer Assistance Center. You will be required to call in advance and make an appointment at an IRS designated Taxpayer Assistance Center.

Want any assistance for getting or renewing your ITIN?

If you are a resident alien in the US or your spouse or dependent are a resident alien and are required to file tax returns then the Individual Tax Identification Number (ITIN) will act as your tax ID. You will be required to submit an ITIN number application along with identification and foreign status documents, which can be quite a cumbersome process. If you are looking for information or have any query pertaining to applicability of ITIN then the IncParadise team can provide assistance.

We can also provide information or help answer any query you may have related to any aspect of new business formation and provide a range of additional services that will assist in maintaining and smooth functioning of a business.

Turn your idea into a business today!