A Social Security Number (SSN) is used by a U.S. person and third parties for purposes of reporting income, loss, and interest realized by that particular person. The SSN allows IRS to track the accuracy and satisfaction of each person’s tax filing and payment obligations. For a person, who does not qualify for an SSN, but does have a tax filing and/or payment obligation, IRS may assign an Individual Taxpayer Identification Number (ITIN). An ITIN may be assigned regardless of an applicant’s immigration status because the Internal Revenue Code (IRC) imposes tax filing obligations on both resident and nonresident aliens. The primary use and purpose of issuing an ITIN is to ensure a non-citizen’s compliance with the IRC. Therefore, to qualify for and obtain an ITIN, an applicant must have a tax filing obligation and file a return, subject to certain exceptions. To ensure ITINs are being used for legitimate tax purposes, IRS recently revised certain procedures to provide that new ITINs will expire after five years.
Foreign individuals who may be eligible ITIN applicants include non-resident aliens who own, invest, and/or receive income from U.S. companies, resident or nonresident aliens who wish to sell or purchase certain property, foreign-born students, and dependent children or spouses of U.S. citizens. For example, certain sales of real property by foreign individuals are subject to a withholding requirement (“FIRPTA” Foreign Investment in Real Property Tax Act) equal to ten percent (10%) of the sale proceeds, which is submitted to IRS upon completion of the sale to serve as security for the foreign seller’s payment of any potential income tax due on such transaction. In order for the foreign seller to apply for and receive a refund of the withholding, the foreign seller must submit the requisite application containing his or her ITIN.
To obtain an ITIN, applicants must submit form W-7 along with original documentation, such as passports, birth certificates, or certified copies of such originals from the issuing agency. For example, if an applicant was issued their passport in the Canada, to properly submit an ITIN application, such applicant would be required to either surrender their original passport to the IRS or obtain written certification of a copy of the passport from the issuing office in Canada. In the alternative, applicants may file their applications and supply the requisite documentation to Certifying Acceptance Agents (CAAs), which are authorized to review original documents or copies certified by the document’s issuing agency, and certify the authenticity of such to IRS. In addition, applicants may visit available IRS Taxpayer Assistance Centers (TACs) and U.S. Tax Attaches in certain foreign countries.
Unlike an SSN, an ITIN holder is not eligible for Social Security benefits or the Earned Income Tax Credit. However, if an ITIN holder later becomes eligible for Social Security, the ITIN reported earnings may be applied toward any available social security benefits. An ITIN cannot be used to substantiate legal presence in the U.S. or to provide authorization to work on an I-9 form. An ITIN may be used to open a U.S. bank account and some states have permitted the ITIN in place of an SSN for driver’s license, permit, and state identification applications.
For additional information regarding ITIN applications and procedures, please refer to Final Revised ITIN Application Requirements, and feel free to contact our office.
