An individual taxpayer identification number (ITIN) is a number used for handling taxes given by the Internal Revenue Service (IRS) to people who must have a United States taxpayer identification number but cannot be issued with a Social Security Number (SSN).
ITINs are nine-digit numbers that resemble SSNs like this: XXX-XX-XXXX, although they always start with 9. ITINs were introduced to facilitate tax reporting and compliance for individuals who do not qualify for an SSN, thus every individual regardless of their immigration status should meet his/her tax obligations.
In this article, we will discuss the ITIN and the importance of ITIN for Non-Resident aliens and immigrants.
Who needs an ITIN?
Non-resident aliens usually use ITINS together with their spouses or dependents when they lack access to social security numbers. These include:
- Foreigners that must file US tax returns
- Resident aliens based on days spent in the US while filing US tax return
- Dependents/spouses of US citizens/residents
- Dependents/spouses of nonresident alien visa holders
Non-resident aliens may refer to foreign students, scholars, and research fellows temporarily visiting the United States. In addition, international investors earning income from U.S. sources and individuals under certain visa categories working in the country may also need an ITIN for tax purposes.
Importance of ITIN for Non-Resident
Compliance with U.S. Tax Laws
U.S. tax laws apply to non-resident aliens and immigrants who earn money within its borders. ITIN allows them to submit their tax returns and pay relevant taxes accordingly. Failure to fulfill these obligations can lead to penalties and imperil one’s immigration status. Not only does abiding by taxation regulations help avoid fines but it also helps maintain good legal standing which can be critical during future immigration processes or permanent residence applications.
Claiming Tax Benefits
Holders of ITINS are eligible for select tax breaks such as the Child Tax Credit or educational credits among others. This aids in lowering the amount of taxes owed or increasing refund amounts. Relief measures like child tax credit can help families reduce their overall tax burden thus enabling them to meet household expenses.
Opening Financial Accounts
ITINS are acceptable in some American banks and financial institutions’ account opening procedures. This is important for non-residents and immigrants who must monitor their finances or establish a credit history within the United States. Access to banking services allows people to securely save, take loans, and do other regular transactions.
Filing Tax Returns for Dependents
Every dependent of a non-resident alien or immigrant in the US should have an ITIN to be included in his/her tax return. The aim is for the taxpayer to claim the right number of exemptions and credits that apply to these dependents. Properly listing dependents can optimize the taxpayer’s return, ensuring they receive all applicable credits and deductions they are entitled to.
Employment and Business Purposes
Although it does not permit work within the U.S. (only SSN does), ITIN is necessary for those individuals who need to comply with employment-related tax-reporting requirements. Also, ITINs are commonly used when declaring income from business activities such as those carried out by freelancers, independent contractors, or small-scale entrepreneurs who ought to report what they earned besides paying their corresponding levies.
Credit History Building
Building a credit history is possible for foreigners and emigrants with ITINs. This applies to applying for loans, mortgages, or even credit cards, which are important aspects of financial life. Getting favorable loan terms and other financial products is mainly influenced by the quality of a person’s credit history which significantly determines their financial stability and prospects.
How to Apply for an ITIN
Step 1: Get Form W-7
Acquire Form W-7 People must fill out IRS Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. The places where you can acquire one are the website of the IRS, local IRS offices, and the IRS toll-free number 1-800-829-3676.
Step 2: Fill out Form W-7
Applications should include personal information on a form W-7 like name, mail address, date of birth, and reason for application; to confirm more about your immigration status such as identification and foreign status, one needs further information about immigration status and accompanying documents.
Step 3: Obtain Corresponding Records
Applicants need to provide original or certified copies of all supporting documentation along with their identification card so that they may be able to attest to identity and immigration status when accompanied by form W-7. Passport cards NID cards and visas issued by the US Department of State are acceptable forms of identity.
Step 4: Send in your application
After filling out the Form W-7 as well as any other required paperwork one can either mail it or take it personally at an IRS taxpayer assistance center (TAC). When applying for ITIN you must understand that this number is not used outside the tax system as a personal identification identity but exclusively given for taxation purposes only.
However, it allows some people who own financial accounts to use which they file taxes since it does not offer employment authority or legal immigrant status.
Conclusion
More than just a number, an ITIN is a lifeline for foreign nationals living on America’s soil thus complying with tax laws accessing benefits and services plus joining United States finance markets. Therefore obtaining an ITIN is central to anyone who has tax obligations that need to be met while living in America managing his/her finances. Besides complying with tax, one who has ITIN can access financial services and benefits that make life in the US more stable and better.
For assistance with the ITIN application or to learn about its advantages, you may contact a tax professional or visit the Internal Revenue Service website. They will assist you with the application process, ensure all necessary documents are prepared correctly, and explain the implications of having an ITIN for your case.
Frequently Asked Questions (FAQs)
Do I need an ITIN if I have a Social Security Number (SSN)?
No, in case you own an SSN, do not require ITIN since it is the taxpayer identification number for US taxes.
Can I use my ITIN for state tax returns?
Surely you can always file your state taxes by using your taxpayer identification numbers but then they should be forwarded to each state’s revenue agency to confirm.
How long does it take to receive an ITIN?
The waiting period for this process takes around 7-11 weeks once the IRS starts processing applications. However, during peak seasons it may take longer.
Nabin Adhikari
