Individual Taxpayer Identification Numbers (ITINs) explained

Everything you need to know about an individual taxpayer identification number (ITIN)

What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) for individuals who are required to have a US taxpayer identification number but do not have one and are not eligible to obtain a Social Security Number (SSN). The IRS uses ITINs to process and record tax returns and payments for individuals subject to US tax laws but does not have an SSN.

Who needs an ITIN number?

You might need an ITIN if:

  • You receive income from US sources or own US real property interests. For example, you are a non-US person working in the USA, holding investments in US assets and businesses or receiving rental income from U.S. real estate.
  • Selling a property in the USA.
  • Are a dependant of a US taxpayer, but you are not eligible for an SSN, for example, if you are a non-resident foreign spouse or child of a US taxpayer.
  • You are a non-US student studying in America.

You will need to apply for an ITIN if you need to file a tax return and aren’t eligible for an SSN.

In addition to the above, you may also need an ITIN if you have inherited from a US estate, need to claim reduced tax withholding under a tax treaty benefit, have sold US real estate or are in receipt of income for a US retirement account.

How is an ITIN obtained?

To apply for an ITIN, individuals must complete form W-7 (Application for IRS Individual Taxpayer Identification Number). The form requires supporting documentation, which typically includes a valid passport and proof of US tax obligations. Typically the IRS requires your original documents to be sent with the application to be certified; however, engaging with a Certifying Acceptance Agent will avoid you having to part with your documents. See our article on the benefits of using a CAA when selling a property in the USA.
Other documents needed as part of the application can include:

  • A W-2 form (Wage and Tax Statement) is a report of wage and salary income, usually given by your employer before the end of January each year.
  • Form 1099 (Miscellaneous Income) is often filled by freelancers and other unsalaried jobs but might be necessary for anyone earning income from other sources such as rent or interest.
  • Form 1042-S showing income received by a non-resident of the USA
  • Form 8889 (Health Savings Accounts (HSAs)), this form is used to report contributions to and distributions from a Health Savings Account (HSA). Financial institutions are required to provide this form to account holders.
  • Form 5498 (IRA Contribution Information), this form is submitted to report contributions to an IRA. Financial institutions are required to provide this form to account holders by May 31st of each year.
  • Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests), this form is used to report

The application can be filed stand-alone if an exception to filing a tax return applies. Otherwise, Form W7 is typically filed with a U.S. tax return.

Final Thoughts

Because the process of applying for an ITIN can be complicated, in most cases, you will want to recruit the services of an IRS Certified Acceptance Agent (CAA). They are familiar with applying for an ITIN and can file the appropriate forms with the IRS to ensure compliance with regulations and avoid the risk of incurring fines or interest through improper tax filing.

If you need an ITIN don’t hesitate to contact our CAA to discuss the application process and how we can assist you.

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