Explain fully the uses of non-US residents to apply for an ITIN tax number
Operating an American company
Foreigners who set up a company in the US or have corporate dividend income are required to file taxes through an ITIN.
Investing in property in the United States
As foreigners we buy investment properties in the U.S. and rent them out, collect the rent or sell the property to make a profit on the difference in price, all of which will be subject to tax withholding, and the investor must have an ITIN in order to file a tax return in order to get the withholding tax back.
Tax benefits for children not born in the U.S. but living in the U.S.
If you are living and working in the U.S. and your non-U.S. citizen/green card child is living and working in the U.S. with you, and the child has an ITIN, he or she may also be eligible for a tax allowance, which is claimed each year at the same time you file your tax return.
Married individuals, filing a joint tax return with their spouse, can take advantage of the double tax deduction that is exclusive to married individuals, regardless of whether the spouse is in the United States or not.
If you live and work in the U.S. and are a Resident Alien, you can apply for an ITIN for your spouse and take a double standard deduction on your and your spouse’s joint tax return, regardless of whether your spouse lives in the U.S. or not.
Apply for a US Credit Card
Credit history is very important when you are studying and working in the United States, and credit cards are indispensable for the accumulation of credit history. However, if you want to apply for a credit card in the United States and do not have an ITIN, the banks you can choose from are very, very limited. The vast majority of banks will not accept applicants without an Individual Tax Identification Number (ITIN), and even Discover, an entry-level white credit card, requires applicants to have an ITIN in order to apply. You can read: “Which US banks accept non-US residents to open a bank account with an ITIN tax number?“.
Open a U.S. stock account and invest in the U.S. stock market
If you want to invest and speculate in stocks at a US brokerage firm, opening a brokerage account and a bank account is indispensable. Different brokerage firms have different requirements for opening an account. Generally speaking, if you are studying and living in the United States, you need an SSN/ITIN to open a stock trading account with a U.S. brokerage firm.
Individual Income Tax Return
In the U.S., it is not only the income from work that needs to be declared as personal income tax. If you have income from interest, dividends, rent, etc., you also need to file a personal income tax return. If you do not have a job and cannot obtain an SSN, but have income from stocks, rent, etc., you need to apply for an ITIN to file a personal income tax return each year.
Application Process and Fees for Applying for an ITIN
Typically, a first-time applicant must complete a Form W-7/W-7(SP), attach the current year’s tax form (Form 1040/1040NR), and an original or certified copy of the applicant’s identification document (see ‘Identification Documents’ below). If a rejection letter is received for the SSN application, this rejection letter must also be attached.
Individuals can apply for an ITIN by mailing in an original passport and application form, or by standing in line at a designated IRS TAC (Taxpayer Assistance Centre) in the United States. The former requires the mailing of an original passport and the applicant bears the risk of losing the documents in the mail; the latter involves a time-consuming search for one of the few TACs that accept them as well as a lengthy waiting period.
Therefore, a more convenient and effective solution for busy business people is to apply through a Certifying Acceptance Agent (CAA), which is officially approved and authorised by the IRS. Theshstudio is a professional Certifying Acceptance Agent who can assist you in applying for an ITIN tax ID number as well as provide related consulting services, and can be contacted through her Fiverr shop.
Applying for a new ITIN is a more complex process and requires more experience in determining the reason for the application, but the steps are very simple for the applicant, requiring only three steps:
- Contact an IRS-certified CAA
- Provide information as requested by the CAA, who will advise you of the information required to ensure that the application is correct.
- Applicant signs the application form and sends it
After that, you can wait for the IRS to send you the ITIN documents.
Generally, the ITIN application and tax forms are prepared at the same time. CAA members are tax accountants and can help you prepare the tax forms and ITIN application/renewal together; the tax forms can only be mailed in the year you apply for an ITIN, but you can e-file your tax return every year after you get your ITIN.
Typically, ITIN approvals take 12 weeks and can take up to 16 weeks during peak tax periods. Once reviewed, the IRS will mail an approval letter containing the ITIN number to both the applicant and the authorized CAA.
Eight reasons to claim your ITIN for the first time
As shown above, to complete the Form W-7, the applicant needs to select one of the following eight reasons for filing:
- Nonresident alien required to get an ITIN to claim tax treaty benefit. If the applicant checks this box, it is usually necessary to also check h and fill in the specific tax treaty that applies to the applicant.
- Nonresident alien filing a U.S. federal tax return. If the applicant is a nonresident alien with U.S. source income, he or she must file an ITIN tax return.
- U.S. resident alien (based on days present in the United States) filing a U.S. federal tax return.
- Dependent of U.S. citizen/resident alien. This option is often used to claim an ITIN for dependents of the taxpayer, including children, parents, and others, in order to receive certain tax benefits.
- Spouse of U.S. citizen/resident alien. Note that when the applicant checks option d or e, the name and SSN information of the U.S. citizen or tax resident alien needs to be filled in next to it.
- Nonresident alien student, professor, or researcher filing a U.S. federal tax return or claiming an exception. In the case of applying an exception, the applicant needs to also tick h exception and state which exception the applicant is applying.
- Dependent/spouse of a nonresident alien holding a U.S. visa This option is only available to individuals holding Canadian, Mexican and Korean passports.
- Other (see instructions) . Generally apply to passive income and tax treaty related income. Individuals who qualify for the exceptions do not need to include a tax form with their ITIN application; they can apply for an ITIN at any time of the year.
How to renew the ITIN?
ITINs are valid for five years and therefore need to be renewed every five years. ITINs that have not been used for tax filing for three consecutive years will expire and will need to be renewed if they wish to file a tax return after the expiry date. To renew an ITIN, the applicant must also complete Form W-7/W-7(SP) and attach the original or certified copy of the applicant’s identification documents. For the convenience of the applicant, the IRS allows family members on the same tax return to update their ITINs at the same time.
What documents are required for the initial application or renewal of an ITIN?
First time applying for an ITIN
Form W-7/W-7(SP), Individual tax form for the year Form 1040/1040NR, Identity document, SSN rejection letter (if any)
Renewing ITINs that are about to expire or have already expired
Form W-7/W-7(SP), Individual tax form for the year Form 1040/1040NR, Identity document
Legally compliant identification documents must meet the following three requirements:
- The authenticity of the applicant’s personal and foreign identity must be proven. A passport with an entry record is the only legal identity document that can be used independently to prove both personal and foreign identity. If it is not available, an identity document consisting of a combination of at least two supporting documents must be provided, and this combination must prove both personal and foreign identity.
- It must be the original document or a certified copy of the original document from the issuing agency of the original record. As an IRS-authorised Certified Appointed Agent (CAA), the CAA can certify the original document on behalf of the IRS and simply submit a copy to the IRS. Dependents and spouses of U.S. military personnel can apply for an ITIN by certifying it through the Special Issuing Authority and submitting a certified copy.
- Must be a valid document, i.e., not expired prior to submission of Form W-7/W-7(SP).