The Individual Taxpayer Identification Number is the term used in English of what we know as ITIN. In this short post, we will see who should process it, how it is processed and what an ITIN is for, in addition of being and identifier to pay taxes.
Although it is not a direct ticket to employment or legal status in the United States, it is seen as a sign that you comply with your tax obligations at the federal level and that you have "good moral character," as reviewed by the National Immigration Law Center (NILC). On the other hand, the ITIN has been the tool that has allowed the Internal Revenue Service (IRS) to raise billions of dollars that otherwise would not have entered the federal budget. Specifically, according to Bankrate, undocumented immigrants through the ITIN contribute more than 11 billion dollars in annual taxes. Without further ado, let's see what the ITIN is, who processes it, how it is processed and its purpose.
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What is the ITIN?
We may define the ITIN or Personal Taxpayer Identification Number as an identifier, a number assigned by the IRS for tax processing applicable to individuals who are non migrant aliens, undocumented immigrants, and all those who do not qualify for a Social Security Number (SSN). The IRS defines the ITIN as: "A tax processing number, issued to individuals who require a U.S. taxpayer identification number and who do not qualify or do not meet the requirements for a SSN from the Social Security Administration." The ITIN is an identifier consisting of nine numeric digits, its first digit will always be the number 9 and it has the format 9XX-XX-XXXX. Another characteristic of the ITIN is that the fourth and fifth digits vary between the numbers 50 to 65; 70 to 88; 90 to 92 and 94 to 99.
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Who should process an ITIN?
The ITIN Personal Taxpayer Identification Number can be processed by immigrants in legal or illegal status, people who even if they do not have a legal status in the U.S. want to be up to date with the payment of taxes. Other people with legal status in the U.S. but who are not eligible for a social security number (SSN) can get an ITIN for the payment of their taxes. Even non-resident aliens can obtain an ITIN, if they maintain some commercial link or business in the U.S. and must pay federal taxes. The American Immigration Council clarifies some cases of people who can also obtain an ITIN:
- Non-resident aliens who engage in trade or business in the U.S., or who receive U.S. income and live in another country.
- Students, academic staff, or the like, as non-resident aliens, filing U.S. tax returns
- Dependents or spouses of U.S. citizens or lawful permanent residents (Green Card holders).
- Dependents or spouses of foreigners on temporary visas.
In short, any individual who needs or wishes to pay federal taxes and does not qualify for an SSN, can file for an ITIN.
What is the ITIN for?
As we have already said or we can infer, the ITIN serves as an ID to pay federal taxes before the Internal Revenue Service. This is how the IRS puts it: "ITINs do not serve any purpose other than filing federal tax returns." However, ITINs, depending on the state where you are or have a commercial link in, have been given other secondary purposes, such as:
- It is a way that facilitates access to banking services in the U.S., since an ITIN makes it easier for you to open a interest-bearing bank account, access credit cards and even in some cases, obtain a mortgage.
- Some states allow you to obtain a driver's license upon evidence of legal presence such as an ITIN. Among them: California, Colorado, New York, Delaware, Maryland, 6 other states and the District of Columbia, according to the National Conference of State Legislatures (NCSL).
- It allows you to show that you are complying with federal taxes.
- As an indicator of "Good moral character" it can be used as a support, along with federal tax returns, in case you need to reinforce or document an employment history or physical presence in the U.S.
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How is an ITIN processed?
If you are interested in applying for an ITIN, you can do it via mail, in person through the so-called Taxpayer Assistance Centers (TAC), or with the assistance of the Certified Acceptance Agents (CAA) endorsed by the IRS. GBS Group is one of them. If you reside outside the U.S., you can file the application by registered mail or in person with IRS officials available at diplomatic missions or consular offices. In any case, you must complete IRS Form W-7 (APPLICATION for IRS Individual Taxpayer Identification Number) and send it via mail to the IRS service center in Austin, Texas, along with your tax return and a document evidence of your identity from the list of 13 documents that the IRS accepts for such purposes. The service center will send you an ITIN and the attachments weeks after processing your information. At GBS Group, we can assist you in your ITIN application by visiting this link.
Tax season is about to end, but you can familiarize yourself with some important dates: Tax Season 2021.
ITIN – Some myths and realities
In this complete blog about the ITIN: What you need to know, we will also tell you about myths and truths of this procedure.
- Myth: The ITIN is not an instrument for obtaining legal work in the U.S. nor does it provide a direct avenue for a change in your immigration status.
- Myth: The ITIN is not used by the government to enforce immigration law. The federal government says its sole purpose is to make it easier to pay taxes, and the IRS does not share taxpayers' private information with immigration agencies.
- Fact: Since Fiscal Year 2015, some 4.4 million ITIN holders have paid an average of $23.6 billion in taxes annually.
- Fact: ITIN holders do not have access to all the tax benefits that U.S. citizens are eligible for, such as the Earned Income Tax Credit (EITC).
- Fact: Some ITIN holders are eligible for the Child Tax Credit (CTC), as long as the child (ages 0-17) has a Social Security Number.
Finally, the ITINs issued after December 31, 2012, must be renewed every five years. If you are the holder of an ITIN but do not use it within three consecutive years, it will expire and it must be renewed. If you have any questions about the ITIN, or require support for its processing, at GBS Group we are an Enrolled Agent before the IRS and we can support you with this and other requirements to optimize your tax burden.