Planning to work in the USA? If yes, then you must apply for an ITIN to save yourself from unnecessary penalties by the IRS.
What is ITIN?
Well, every country has specific tax numbers which are used to identify the taxpayers. Similarly, ITIN or Individual Taxpayer Identification Number is a unique identification number issued by the IRS in the USA.
IRS is the department responsible for collecting and processing the taxes in the USA. The ITIN is required for federal tax purposes by the non-US residents and the resident aliens. One must apply for an ITIN in case of having spouses or dependents which are not qualified to get an SSN. Basically, the ITIN makes you eligible for the US tax compliances.
However, this is not all. Let us list down the details for you in order to clearly understand whether you need to get an ITIN or not.
Who needs an ITIN?
As per IRS, there are mainly two rules which decide whether you need an ITIN or not. These two rules state that you should apply for the ITIN when:
- you don’t have an SSN(Social Security Number)
- you are not eligible for an SSN but needs to pay tax in the US
Even when these rules are quite clear in classifying whether one needs an ITIN or not, let us list down the categories. Federal Tax Department categorizes the individuals who need an ITIN in the following ways:
- If you are a US resident but foreign national who needs to file a tax return in the US
- If you are a non-US resident foreign national who needs to file a tax return in the US
- If you are a non-US resident foreign national who wants to claim a tax treaty benefit
- If you are a resident or non-US resident foreign national on whom a US citizen cannot depend or who cannot be certified as resident
- If you are a foreign national who is on a US tax return
- If you are a foreign national, resident or not, spouse or dependent of a US citizen recorded on a tax return but not filing for a federal tax return
- If you are a foreign national, resident or not, spouse of a US citizen who wants to apply for a joint federal tax return with their spouse
- If you are student, professor, or researcher and non-US resident in need to file for a tax return or claim an exception
- If you are a foreign national, US resident or not, who is claimed to be a dependent or spouse of a non-US resident foreign national having a US visa
If you belong to none of the above mentioned categories, then you must get an SSN..
The Limitations of ITIN
Even if ITIN is used as a substitute to SSN for filing federal tax returns, it doesn’t replace it. There are many restrictions and limitations of ITIN. It doesn’t provide individuals with all the facilities that come with an SSN.
- You cannot get any Social Security benefits.
- You cannot claim the Earned Income Tax Credits.
- It doesn’t provide you with the complete authority of working in the US.
- It can only be applied for when you are required to file a federal income tax return.
- In case you haven’t met any of the conditions mentioned in the section above, you must file for a valid income tax return.
- ITINs cannot be used for any identification purpose other than federal tax purposes.
Remember that ITINs are not just about the exceptions, clauses, and limitations. It also provides you with some benefits, such as:
- One can apply for Child Tax Credit if they have an ITIN.
- In unique situations, even Additional Child Tax Credits can be applied for.
The ITIN Application Process
Applying for an ITIN should be the next step once you have made sure that you need one. Everyone, who wants to apply for ITIN, must fill the Form-W7. This form can be downloaded directly from the IRS’ website and require some supporting documents including:
- Identification proofs
- Federal Tax Return
- Documents explaining the need of ITIN like eligibility proof for federal tax return
It is important to remember that one has to apply the income tax return to the address mentioned in the Form-W7.
What is Form W-7?
Form W-7 is another name of the Application of IRS Individual Taxpayer Identification. You can download the form or fill it online. While filling the Form-W7 in hardcopy, fill it with black ink and sign it. However, in case of typing the details online, sign the paper in hand signatures again. Typewritten signatures or online stamps often get rejected.
Below are the details you need to fill in the Form-W7:
- The reason behind submitting the form.
- Your full name and mailing address in the United States.
- Your address in the foreign country (your home country)
- Birth information and details
- Other important information such as your identification number back in the home country and so on
Along with this, you must select the identification documents you are using to apply for the ITIN. Moreover, the IRS demands answers like whether you have applied for ITIN before. In case of students, professors, and researchers, the details regarding the college and university need to be shared too.
Who can assist you to get an ITIN?
There are a lot more technicalities when it comes to applying for an ITIN and it may get confusing for many. And in such cases, there is nothing wrong in taking assistance from others. In fact, the IRS itself provides certifications to agencies which can help the individuals filing for an ITIN. These agencies are referred to as Acceptance Agents (AA) and Certified Acceptance Agents (CAA).
The application can take up to two months of processing time from the IRS end. Therefore, it could get somewhat hectic or stressful. Taking assistance from a CAA can help you in certain ways:
- Documentation assessment
- Accuracy Check
- Shift the task of application and certificate submission on the agents
- Support Documents Verification
- Original Documents stay with you
Not just that, but these acceptance agents also have experts to answer your queries regarding applying for an ITIN.
Written by- Priyanka Rampal
To know more about the ITIN process or to get in touch with one of the few Indian IRS CAA, get in touch with our experts here.