With millions of people all over the globe, the United States provides opportunities for investment, employment, education, and even business.
For many of these people, the skeleton of the U.S. financial and tax system remains out of reach simply because they do not hold a Social Security Number (SSN). This is precisely why the Individual Taxpayer Identification Number (ITIN) exists.
ITINs are provided by the U.S. Internal Revenue Service (IRS) to anyone who needs to report taxes or be included in a return but cannot get an SSN. It enables non-residents, foreign individuals, and other people with tax responsibilities to the United States to adhere to tax obligations without being governed by U.S. tax laws.
ITINs can be used in many other ways that are not strictly tax-related. Here are the most important ITIN Number Benefits for Non-residents and immigrants in the U.S.
1. File and Pay U.S. Taxes Legally
As with every legal document, ITIN also comes with a set of advantages and disadvantages. The main one is that those who do not have a Social Security Number can now file state and federal taxes.
If you gain income through U.S.-based rental properties, freelance work, investments, or even royalties, you must report this income to the IRS.
Tax compliance is a near-impossible feat for non-residents without an ITIN since paying taxes legally helps in prescriptions. This establishes a history of compliance, which is beneficial when applying for a license, immigration documents, or even a business in the future.
It’s another way of telling the IRS that you mean no harm and are simply obeying the law.
2. Open a U.S. Bank Account
ITIN holders are allowed access to personal or business bank accounts in the U.S. even without having or being eligible for an SSN. As such, non-residents who require a US bank account to manage rent obligations, business revenue, or income from clients find this extremely beneficial.
In addition, possessing a U.S. bank account enhances the accessibility of American financial services. This includes credit and savings accounts, payment processing, and even digital wallets.
It makes any business activities in the US easier. It helps reduce foreign transaction fees while giving trust and legitimacy to the clients and customers.
3. Start or Expand a U.S. Business
As a foreign entrepreneur who desires to start a Limited Liability Company (LLC) or Corporation in the U.S., meeting some requirements may necessitate acquiring an ITIN.
An ITIN is vital for meeting some requirements, even though forming an LLC does not require an SSN. An ITIN is needed for federal and state tax reporting, applying for an Employer Identification Number (EIN), or opening a U.S. bank account in the name of the business.
An ITIN facilitates receiving income, business tax filings, and applying for certain financing options.
From a partner, client, or vendor perspective, an ITIN indicates that the business is operational and, more importantly, that the owner is committed to the United States legislation.
4. Claim Tax Treaty Benefits
Several countries have entered into tax treaties with the United States through which their residents enjoy lower tax rates or even exemptions for some U.S.-sourced income.
Treaties have the effect of reducing withholding tax on dividends, pensions, royalties, interest, and many more.
To benefit from a treaty, you must file a U.S. tax return and provide a valid ITIN. Without an ITIN, you may be subjected to default higher withholding rates, which can adversely impact your net income.
These benefits, when claimed properly, help retain a person’s earnings while ensuring compliance with the law.
5. Claim Tax Credits
These restrictions don’t apply to individuals who hold an ITIN. Certain refundable or non-refundable tax credits, like the Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC), are available to taxpayers with qualifying dependents.
Having an ITIN enables lower and moderate-income families to receive substantial financial benefits. While an ITIN does not give automatic access to all tax credits, it is a first step toward claiming them.
For tax purposes, it is recommended to work with a tax professional to correctly claim everything you’re entitled to.
6. Identification of a Financial Transaction
ITINs do not grant legal status or work permission, yet it is recognized as a secondary form of identification by numerous corporations. Some employers, property owners, and even credit firms consider an ITIN while evaluating applications for mortgages and other credits.
This is especially beneficial to individuals looking to establish credit or obtain services in the absence of an SSN. Certain credit institutions can even access credit history with an ITIN, allowing individuals to track their financial history in the U.S, aiding in long-term planning and development.
7. Compliance Builds a Stronger Case for Immigration Purposes
In the case of an individual pursuing some immigration benefits or change of status, keeping a tax compliance record in a chronologically correct and consistent manner is an asset.
Filing taxes with the use of an ITIN provides proof that there is an appreciable effort towards joining the U.S. economy, and that the law’s requirements are being followed.
Having an ITIN does not directly relate to immigration status. However, legal experts suggest that individuals who are in the process of getting a green card or permanent residency try to build a strong tax history.
This, particularly under family-based and employment-based applications, can help improve the case from the perspective of immigration officials.
8. If Applicable, Obtain a Refund
Even without a Social Security Number, if your tax return shows an overpayment, you can receive a refund from the IRS if you qualify for certain deductions or refundable credits.
Filing with an ITIN allows you to claim any eligible refund. ITIN allows you to receive every appropriate refund, upholding taxpayer rights under U.S. law.
Refunds can stem from various sources, including excess withholding, tax treaty benefits, or refundable credits like the Additional Child Tax Credit. If you don’t file your return, you are leaving money on the table.
Regardless of low income or minimal tax liability, it is worth filing to check if you are eligible for a refund.
9. Purchase Property in the United States
The American real estate market tends to attract foreign investors and non-citizens due to its perceived stability and profitability.
The purchase of commercial and residential properties comes with the requirement of an ITIN for tax return filings concerning rent income, or in compliance with FIRPTA when selling the property.
Compliance with IRS regulations is effortlessly achieved when transactions include an ITIN, as this eliminates the risks of incurring penalties as well.
ITIN also ensures proper claiming of deductions associated with expensing in the property, as well as proper investment structuring to lessen the tax burden.
10. Assists Family Members to File Taxes
Spouse and dependents who do not qualify for an SSN can still file for an ITIN. This is beneficial if you intend to file a joint return, claim dependents, or take some of the tax benefits for which you qualify.
For instance, married filing jointly often comes with lower tax rates and higher deduction limits.
Having ITINs for your entire family also guarantees that each family member’s monetary contribution is accounted for, thus ensuring that the entire family is compliant with the tax obligations of the U.S.
This may be necessary if your plans involve staying within the U.S. borders or if you wish to become a permanent resident.
Conclusion
Although the ITIN is perceived solely as a tax identification number, it is noteworthy that the ITIN is assigned to an individual without any history within a country and serves many other additional purposes.
It serves as an identification enabling foreigners, including non-residents and immigrants, to participate fully in the business and finance ecosystem of the United States.
With an ITIN, individuals can file taxes, open bank accounts, start businesses, and build credit, all of which were once out of reach due to a lack of proper documentation. The number unlocks limitless possibilities.
If you are thinking of applying for an ITIN, personally or professionally, EasyFiling is ready to assist you, so do not hesitate.
We offer precise simplifications of each application’s procedural steps while guaranteeing compliance with IRS regulations and providing unparalleled support throughout the entire project.
Swostika Silwal
