Individual Taxpayer Identification Number (ITIN) – Questions & Answers

If you are a real estate agent, property manager, immigration attorney, or business broker, your foreign clients will need an ITIN to transact in the US  - such as buying or selling a property/business or collecting US source income. Below my recommendations for a worry-free ITINs process:

What is an ITIN?

An ITIN is a Tax Identification number: The Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS). It is a 9-digit number that always begins with the number 9 and can have the following ranges:  from 900-70-0000 to 999-88-9999, from 900-90-0000 to 999-92-9999 and from 900-94-0000 to 999-99-9999.
The ITIN is for tax processing only - the ITIN program was created in 1996 to help taxpayers comply with the U.S. tax laws. It enables the IRS to efficiently process and account for tax returns and payments for those not eligible for foreign nationals. The ITIN ensures that individuals pay taxes regardless of their immigration status.

Read more on general ITIN information:

An ITIN does NOT:

  1. An ITIN does NOT provide a tool to track unauthorized immigrants: ITINs enable undocumented immigrants to legally file taxes in the US, even if they lack the appropriate immigration status. ITINs are issued by the IRS and are not related to the US Citizenship and Immigration Services (USCIS). The IRS does not share applicants’ private information with immigration enforcement agencies.
  2. An ITIN does not entitle to Social Security benefits: for example, an ITIN holder is not eligible for the Earned Income Tax Credit (EITC).
  3. An ITIN does not authorize an individual to work in the US: an ITIN is not a work authorization and should not be used to apply for work. Employers should not be using ITIN numbers for payroll tax reporting.

Who should apply for an ITIN?

Individuals who are required to have a U.S. taxpayer identification number but who are not eligible for a social security number (SSN) may apply for an ITIN, such as individuals who:

  1. You need to report US income: For example, if you earn rental income on a US property
  2. You need to obtain a tax refund:  For example if you sold your real estate property in the US. When a non-resident sells a property in the US, he will be subject to a 15% withholding the day of the sale (FIRPTA). To get this tax back, you will need apply for an ITIN and file a US non-resident tax return.
  3. You are present in the US on an E1/E2 visa and want to claim your child on your tax return.
  4. To obtain a tax deduction for your child (exemption), you will need to apply for an ITIN for your child.

Tip: Reduced tax withholding with an ITIN: If you have an ITIN prior to the sale of your real estate investment, the tax withholding (FIRPTA) may be avoided by filing a certificate. Such certificates can only be issued to individuals with valid ITINs.

Read more – ITIN for foreign property buyer / seller:

Other advantages of obtaining an ITIN:

ITINs are issued by the IRS specifically to pay federal taxes. While the IRS issues them solely for this purpose, ITINs may sometimes be accepted for other purposes, such as to:

  1. Facilitate a mortgage application
  2. Obtain a driver’s license
  3. Claim dependents from the U.S, Mexico or Canada on a tax return
  4. Open a bank account - Some banks, credit unions and financial institutions accept ITINs to open savings and/or checking accounts that pay interest.
  5. Provide proof of residency. At some point in the future an immigrant may need to prove how long he/she has been in the United States and having a tax return filed using an ITIN is one way to show that. Immigrants can use tax returns to document their work history and physical presence in the U.S.

Does an ITIN expire?

When the IRS originally issued ITINs, they had no expiration dates (like SSNs). With the 2015 Protecting Americans from Tax Hikes Act (PATH Act) , some taxpayers will be required to renew their ITINs. The 2 categories of taxpayers who will need to renew are those with:

  1. Unused ITINs – ITINs which have not been used to file a federal income tax return in the last 3 years will be deactivated by the IRS.
  2. Expiring ITINs - the IRS will expire by phases ITIN group every year.

Read more:

Can an ITIN be used to claim Tax credits?

ITIN holders are not eligible for all of the tax benefits and public benefits that U.S. citizens / residents receive.  However, ITIN holders are eligible for the Child Tax Credit (CTC). The tax credit may be worth as much as $1,000 per qualifying child, depending upon the applicant’s income and only if the dependent is a citizen, national, or resident of the United States. Examples, holders of E1/E2 visa with children that are not eligible for a SSN can still claim them as dependent on the tax return with an ITIN.

How to apply for an ITIN?

A taxpayer in the US can apply for an ITIN by mail, in person through a designated IRS Taxpayer Assistance Center (TAC), or with the help of a Certified Acceptance Agent (CAA). A taxpayer who resides outside the U.S. may apply by mail or in person to a designated U.S. diplomatic mission or consular post. The ITIN application cannot be filed electronically (efile).

What is the advantage of using a Certifying Acceptance Agent (CAA) to apply for an ITIN?

CAAs are individuals who have entered into a formal agreement with the IRS and are allowed to help individuals obtain ITINs. CAAs are required to take a formal forensic training to help them review legitimate identification documents. As a CAA, Kbauer Financials LLC is authorized by the IRS to help US residents and US non-residents, their spouses and dependents to apply for an ITIN. Upon review of your documentation, Karine Bauer, EA will complete a certificate of accuracy and forward your application along with your documents to the IRS for processing.

The benefits of using the services of a CAA are:

  1. You do not need to send original documents to the IRS: the CAA will certify your ID documents so that you will not need to mail original documentation such as passport to the IRS.
  2. You do not need to be physically present to get ITIN application processed.  If you can't travel to the US, your application can be processed by a video conferencing interview with you.

Read more – apply for ITIN with just one click! -

What documents must be included with the ITIN application?

The application involves submitting the IRS Form W7 along with the tax documents and the identification documents. There are 13 acceptable ID documents to attach to the W7 form. Each document must be current and contain an expiration date.  Documents must also show your name and photograph, and support your claim of foreign status.  The most common document used in an ITIN application is the passport.

Read more – Form W7 and instructions:

How long does it take to receive an ITIN?

During peak tax season (January to April), the processing time is between 8 to10 weeks, outside this period the processing time is 6 weeks. To avoid any possible similarities with a Social Security Number card, the IRS changed from an ITIN card to an authorization letter on watermark security paper (notice CP565) to deliver the ITIN.

Every year, the IRS rejects a large amount of incorrect ITIN applications. The most common error in ITIN application is submitting a notarized copy of the passport instead of the original. Because very few individuals can go weeks without their passport, they contact CAA agents for their ITIN needs. Contact Karine Bauer EA at Kbauer Financials LLC today to start the ITIN process for your clients and ensure their compliance to US Tax Law.

Updated:  October 15th, 2017