So, are you a bit puzzled about what an Individual Tax Identification Number is? Well, not to worry; you’re on the right page.
There are several questions that people have regarding the ITIN and just how it works. Let’s break down this concept and make it easy to understand. So, let’s get started and leave any confusion behind once and for all.
What is an Individual Tax Identification Number (ITIN)?
An ITIN is a tax processing number issued by the Internal Revenue Service. It is composed of nine digits and is much like an SSN.
However, it is issued to individuals who are not eligible for an SSN, but they need to file tax returns or meet other tax requirements of the United States.
To Whom an ITIN is Issued
You are probably wondering, “Who needs an ITIN?” Not everyone does; the typical ones are as follows:
- Non-resident aliens who have to file a U.S. tax return.
- Resident aliens who are required to file a tax return depending on the number of years they stay in the U.S.
- Dependents or spouses of U.S. citizens and resident aliens.
- Dependents or spouses of non-resident visa holders.
- Entities that cannot obtain a Social Security Number.
An ITIN allows these people to submit to the U.S. tax laws, even though they are not qualified for an SSN.
Why is Having an ITIN Important?
You may ask, “Why should I get an ITIN?” Here are some reasons why having an ITIN is crucial:
- Tax Filing: The most significant application of an ITIN is while filing taxes. Even if you have been working in the United States, yet you have no SSN, revenue to the government is still very much needed; thus, an ITIN becomes handy while filing your returns. This way, you avoid penalties, fines, or even worse troubles with the law.
- Tax Credits: Tax credits, including the Child Tax Credit, are only available to those who file their taxes. You could claim this using an ITIN. Such reductions can decrease your liability or increase the amount of refund you receive.
- Bank Accounts: Some banks have accounts that can be opened using an ITIN. This is useful in monitoring how one’s money is being used and will also establish an account history for oneself here in the United States.
- Legal Compliance: Even if one is not eligible to receive an SSN, one is still required to be tax compliant with the United States. An ITIN can be used for this purpose.
How to Obtain an ITIN
ITIN application is incredibly easy. Here’s how to do it:
- Form W-7 of IRS: Fill out the Form W-7, giving basic information about you: your name, address, and a little information on the reason for your application.
- Submit Supporting Documents: You will have to send in documents which prove your identity and also that you are foreign. A passport, a national ID card, or even a birth certificate can be used.
- Mail Your Application: After you fill in the application and gather all the supporting documents, mail it all to the IRS. You should follow the mailing instructions that accompany your application.
- Wait for Your ITIN: In general, it takes about 7 weeks to get your ITIN. However, it can take more than that during peak periods.
- Renew Your ITIN If Necessary: ITINs are only good until they are used on a federal tax return for the last three years. If you have an ITIN and you haven’t filed taxes recently, you may need to renew it for the next tax filing.
Common ITIN Myths
There is a lot of misinformation regarding ITINs. Let’s dispel some of the common myths:
- An ITIN is not a work permit: Having an ITIN does not lend you any legal rights for working in the U.S. It is only applicable for tax purposes.
- An ITIN doesn’t grant immigration status: An ITIN isn’t going to help you get an immigration status at all.
- ITINs don’t offer Social Security benefits: Unlike an SSN, an ITIN does not entitle you to Social Security or other federal benefits. It is solely for tax reporting.
ITIN vs. SSN: What’s the Difference?
Here’s a comparison between ITINs and Social Security Numbers (SSNs):
| ITIN | SSN |
| Issued to individuals who cannot get an SSN | Issued to U.S. citizen and eligible residents |
| Used solely for tax purposes | Used for tax, employment, and Social Security benefits |
| Does not permit work | Permits employment |
| No access to Social Security benefits | Has access to Social Security and other benefits |
Can You Use an ITIN for Employment?
No. ITINs are not usable for legal employment in the U.S. They are not work permits. You would need to apply for a work visa or other legal permission to work here legally.
What is the result if one does not obtain an ITIN?
If you need an ITIN but do not apply for one, then there is a whole host of significant consequences. You might not be afforded the chance to file taxes properly. This can then lead to fines or penalties from the IRS. On top of that, you could forfeit tax credits or refunds which you would otherwise be eligible for.
Conclusion
An ITIN is important for those who are non-citizens of the U.S. because they will need one for reporting purposes and possibly even an American tax identification number.
Domestic citizens who are required to file taxes, or other tax obligations in the United States.
While not a Social Security Number and thereby confers no rights to work, an ITIN will help you remain compliant with tax laws, qualify you for some credits, and open up financial opportunities. If you think you may qualify for an ITIN, apply.
That is a very simple process that may save you trouble in the future. Do you have any further questions? Feel free to ask in the comments below!
For more detailed information on Individual Taxpayer Identification Numbers (ITINs), including how to apply and legal considerations, visit the IRS official page on ITINs.
For further assistance with ITIN applications, check out our ITIN page.