For international entrepreneurs who are looking to expand their business into the US market, it's important to understand the tax regulations you'll need to comply with. One key element of this includes obtaining an Individual Taxpayer Identification Number (ITIN). However, the process of applying for an ITIN can be confusing and time-consuming, especially if you haven't thoroughly familiarized yourself with US tax regulations. In this blog post, we'll provide a practical, step-by-step guide to help you navigate the ITIN application process and ensure you're fully compliant with US tax laws.
For international entrepreneurs who are looking to expand their business into the US market, it's important to understand the tax regulations you'll need to comply with. One key element of this includes obtaining an Individual Taxpayer Identification Number (ITIN). However, the process of applying for an ITIN can be confusing and time-consuming, especially if you haven't thoroughly familiarized yourself with US tax regulations.
In this blog post, we'll provide a practical, step-by-step guide to help you navigate the ITIN application process and ensure you're fully compliant with US tax laws.
Let's dive in!
An ITIN is a crucial identification number that foreign entrepreneurs and other individuals need to comply with US tax regulations. It's a nine-digit number issued by the IRS for tax processing purposes and is designed for those who aren't eligible for a Social Security number (SSN).
For instance, if you're a non-US citizen and don't qualify for an SSN, you'll need an ITIN to pay taxes on income earned from US sources. It's also required for certain other purposes, such as opening a US bank account, securing a loan, or claiming tax treaty benefits. In this blog post, we'll dive deeper into the details of what an ITIN is, who needs it, and how to obtain one.
An ITIN is primarily used for tax purposes in the United States. The Internal Revenue Service (IRS) issues ITINs to individuals who are not eligible for a Social Security number (SSN) but still need a US taxpayer identification number to file taxes or meet reporting requirements under the Internal Revenue Code.
It's worth noting that both US residents and non-residents, regardless of their immigration status, may need an ITIN. Therefore, having an ITIN helps ensure compliance with US tax laws and allows for efficient processing and accounting of tax returns and payments.
Even if you are not a citizen of the U.S., having an ITIN will still allow you to avail some benefits like - a refund of income tax, claiming tax benefits, filing taxes, opening a U.S. bank account, claiming tax benefits, etc. And so, an ITIN form is essential to document all individuals under the U.S. tax laws as it ensures an efficient way to process and account for tax returns, payments, etc.
In a nutshell, an ITIN does not:
Provide authority to work in the U.S.
Acts as a document of eligibility for Social Security benefits
Enables you to qualify for Earned Income Tax Credit Purpose
Alternatively, these are what an ITIN form can do:
Help to open a U.S. bank account (personal and business)
File a tax return
Open a PayPal or Stripe account to receive payments
Get documented for unemployment (if needed)
Any individual living inside and outside the U.S. can apply for an ITIN number. This puts both residents and non-resident visa holders in contention to apply for an ITIN number. So, you can apply for an ITIN if you are:
A non-resident of the U.S. who has not qualified for obtaining a Social Security Number (SSN)
A non-resident of the U.S. who has not qualified for obtaining a Social Security Number (SSN)
A non-resident of the U.S. who requires filing a tax return
A U.S. resident who is required to file a tax return
A dependent or a spouse of a U.S. citizen, resident, or non-resident person having a visa
A dependent or a spouse of a non-U.S. citizen holding a visa.
If you intend for your U.S. income tax return to be determined by an ITIN, then you should abide with whatever guidelines the IRS supplies when filling out the ITIN application. So, if you intend on filling out an ITIN application, go to the IRS website to learn more about the application procedure and make sure you have all the necessary data required.
Here is the following information required to get an ITIN.
Proof of your identity, i.e., your passport or TWO other identity documents.
A residency status of the applicant in a foreign country, like in the U.S.
Here are some of the identification documents that you can submit, which are supported by the IRS:
U.S. Driving Licence
U.S State Identification Card
U.S. Military Identification Card
Photo ID issued by the USCIS (United States Citizenship and Immigration Services)
Foreign Driving Licence
Foreign Military Identification Card
Foreign Civil Birth Certificate
Foreign Birth Certificate
Foreign Voter’s Registration Card
Foreign School Records (for dependents under the age of 18 and are currently students)
If you're having trouble meeting the standard requirements for an ITIN, it's worth checking to see if any exceptions apply to your situation. Check if you're eligible for any exceptions listed here: https://www.irs.gov/instructions/iw7#idm139766236836272
You generally need a tax filing requirement in the US and file a federal income tax return.
Fill out Form W-7 to apply for an ITIN.
Work with a tax accountant who specializes in US taxes for foreigners.
Provide proof of foreign status and identity (a passport is the easiest option).
Check the list of accepted documents for proof of foreign status and identity.
Getting an ITIN can be important for filing taxes in the US, especially if you're a foreign national. Working with a professional can help ensure everything is done correctly.
There are FOUR ways to submit an ITIN application to the IRS:
1. Send Via Mail
If you send your W-7 form application or other documents, and the document described under Supporting Documentation Requirements via mail, use the following address:
Internal Revenue Service
P.O. Box 149342
It's important to note that when mailing your ITIN application, you should not use the mailing address provided for tax returns. The IRS has a specific address for ITIN applications, which can be found on its website or by contacting them directly.
2. Send Via Private Delivery Service
If you send your W-7 form application or other documents, and the document described under Supporting Documentation Requirements via a private delivery service, use the following address:
Internal Revenue Service
Mail Stop 6090-AUSC3651
S. Interregional Hwy
35 Austin, TX
As advised, please do not use the mailing address given in the instructions for your tax returns when you are mailing your application.
3. Deliver In-Person
You can apply for an ITIN by visiting a designated IRS Taxpayer Assistance Center (TAC)
TAC staff can verify original and certified copies of documentation for applicants and dependents.
TACs can also verify the documentation of dependents, including passports, national identification cards, and birth certificates
Any verified documents will be returned to you immediately
Service at TACs is by appointment only, and appointments can be scheduled by calling 844-545-5640
Check IRS.gov/W7DocumentVerification for a list of designated TACs that offer ITIN document authentication service
Non-participating TACs will mail documents, Form W-7, and tax returns to IRS Austin Service Center for processing.
Remember that applying for an ITIN can be a lengthy process, so it's important to plan accordingly and make sure you have all the necessary documentation before submitting your application.
4. Apply Through An Acceptance Agency
There are TWO types of acceptance agencies that accept W-7 documents. These are:
Acceptance Agent (AA)
An Acceptance Agent (AA) can provide assistance with filling out the W-7 form, but they are not responsible for verifying the authenticity of the supporting documents. Their role is to review the completed form and submit it to the IRS along with the original or certified copies of the required documentation from the issuing agency. To locate an Acceptance Agent, visit the IRS.gov website and search for the "Acceptance Agent Program," which provides a list of qualified agents who can assist with the application process
Certifying Acceptance Agent (CAA)
A Certifying Acceptance Agent (CAA) can authenticate all necessary documentation for a W-7 application. After validation, the CAA will promptly return the documents to you. It's important to note that taxpayers residing outside the U.S. must apply through a CAA.
Your ITIN certificate has an expiration date that requires renewal every five years. In case you haven't used it for three consecutive years, it will expire and you'll need to apply for a new one.
The renewal process involves submitting a W-7 form and supporting documentation, similar to the initial application. It's crucial to renew your ITIN on time to prevent any tax-related problems.
Overall, it's important to keep track of your ITIN's expiry date and ensure that it's renewed on time to avoid any issues with your taxes.
After submitting your W-7 form to the IRS, it generally takes around seven weeks to receive your ITIN. To avoid delays, ensure that all original documents are submitted and that the form is complete and accurate.
If you want to avoid late penalties, submit your W-7 form before April 15th. If the seven-week timeline has passed and you haven't heard from the IRS, you can check your application status by calling their toll-free number at (800) 829-1040 if you live in the US.
For those living outside the US, the number is (267) 941-1000. Alternatively, you can check your status online using the "Where's My ITIN?" tool on the IRS website. In some cases, the processing time may take longer than usual, so it's best to check your application status regularly.
An ITIN and an SSN are two different identification numbers used in the U.S. While the IRS issues ITINs for federal tax reporting purposes, an SSN is issued by the Social Security Administration (SSA) to U.S. citizens and qualifying resident aliens. An ITIN doesn't grant an individual permission to work in the U.S., unlike an SSN which serves as a work authorization for eligible individuals.
Furthermore, an SSN is used to track an individual's work history and lifetime earnings in the U.S. In contrast, an ITIN is exclusively used for tax purposes and does not affect an individual's immigration status. While both numbers are used to identify individuals in the U.S., it's essential to understand the difference between the two and the purposes they serve.
To add more, lawful residents having an SSN and also legally working in the U.S can apply for the following beneficiaries:
Social Security Disability
Access to U.S. Bank Loans and other amenities
Healthcare facilities for senior citizens
In summary, ITINs are for tax reporting purposes only, while SSNs are used for both tax reporting and as a form of identification for citizens and qualifying resident aliens.
To sum up, obtaining an ITIN is a necessary process for anyone who needs to file taxes in the United States. While the application process may seem complex, seeking the help of a professional can make it more manageable and less stressful. Business Globalizer is a reliable resource that can assist with the ITIN application process and ensure that all required documents are included.
By renewing your ITIN every five years and keeping track of its expiration date, you can avoid any issues with your taxes. Remember that an ITIN and an SSN are two different identification numbers used in the U.S., and understanding their differences is crucial. With the right guidance and support, you can successfully obtain an ITIN and fulfill your tax obligations in the U.S.
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