For identification and tax reporting purposes, both employers and workers need Taxpayer Identification Numbers (TINs). These numbers let the IRS identify you when you fulfill your reporting and filing requirements. One Taxpayer Identification Number you should know about is the ITIN. What is an ITIN?
Types of Taxpayer Identification Numbers
There are several types of Taxpayer Identification Numbers the IRS issues:
|SSN||Social Security Number|
|EIN||Employer Identification Number|
|ITIN||Individual Taxpayer Identification Number|
|ATIN||Taxpayer Identification Number for Pending U.S. Adoptions|
|PTIN||Preparer Taxpayer Identification Number|
Each of these five TINs is used for different purposes. The IRS requires you to record the appropriate TIN on various documents. For example, you must apply for an EIN if you plan on hiring new employees so you can enter the number on payroll forms. So, what is an ITIN?
What is an ITIN?
As an employer, you work with employees and independent contractors. In some cases, you might deal with a contractor who is a non-U.S. citizen or permanent resident.
An ITIN is a number given to qualifying individuals who cannot get a Social Security number. The ITIN is used on tax forms.
Who is required to have an individual taxpayer identification number?
If an individual has a federal tax reporting or filing requirement with the IRS and does not have a Social Security number, they need an ITIN.
The ITIN does not make an individual eligible for Social Security benefits or the Earned Income Tax Credit (EITC). It also does not authorize an individual to work in the United States. The ITIN is not a substitute for a Social Security number.
If you are an employer filling out Form W-2, you need to have an employee’s Social Security number. Independent contractors, on the other hand, might have an ITIN instead of a Social Security number.
An ITIN is a nine-digit number given by the IRS. It is set up as follows: XXX-XX-XXXX, with the first number always being “9,” and the two middle digits ranging from 70-88.
Workers without an SSN are still required to file their individual income tax return. They file Form 1040NR, U.S. Nonresident Alien Income Tax Return, to report their wages. The worker must include their ITIN on Form 1040NR.
There are a few different reasons someone might need an ITIN. An individual must apply for an ITIN if they are a:
- Nonresident alien who needs an ITIN to claim a tax treaty benefit
- Nonresident alien filing a U.S. federal tax return
- U.S. resident alien filing a U.S. federal tax return
- Dependent of a U.S. citizen or resident alien
- Spouse of a U.S. citizen or resident alien
- Nonresident alien student, professor, or researcher who is filing a federal tax return or claiming an exception
- Dependent/spouse of a nonresident alien who holds a U.S. visa
If an individual needs an ITIN but does not fit any of the above qualifications, they can explain their reasoning when applying.
How to get an ITIN
In order to apply for an ITIN, the individual must file Form W-7, Application for IRS Individual Taxpayer Identification Number. Individuals should not fill out an ITIN application if they applied for an SSN and it is pending.
With Form W-7, the individual can either apply for a new ITIN or renew an existing ITIN. They must attach a valid federal income tax return along with identity and foreign status documents. The identity documents must be original or copies that are certified by an issuing agency.
Form W-7 can be filed one of three ways:
- Via mail (sent to the IRS)
- Through an IRS authorized Acceptance Agent
- By visiting an IRS Taxpayer Assistance Center
If filed by mail, the individual must use the following address:
Internal Revenue Service
Austin Service Center
P.O. Box 149342
Austin, TX 78714-9342
When to apply
Applications for Form W-7 should go out when the individual is ready to file their federal income tax return. Individuals can apply for an ITIN at any time, but they might owe penalties if the attached tax return is late.
How long does it take to get an ITIN?
The individual should receive their ITIN within seven weeks of applying.
Renewing an ITIN
To meet ITIN requirements, individuals might need to renew their individual taxpayer identification numbers (if they need to file a tax return). Individuals need to renew their ITIN so they don’t expire.
Generally, the IRS will mail a notice to an individual letting them know about their upcoming ITIN expiration. If someone’s ITIN needs to be renewed, but they receive a new Social Security number, they no longer need to renew their ITIN.
To renew an ITIN, the individual must file Form W-7, Application for IRS Individual Taxpayer Identification Number and check the box marked “Renew an Existing ITIN.”
There are three ways someone can submit Form W-7:
- Mail Form W-7 and identification documents to the IRS address listed on the form.
- Use an IRS authorized Certified Acceptance Agent or an Acceptance Agent.
- Visit an IRS Taxpayer Assistance Center.
The IRS will send a letter once it approves the application for renewal. Once an ITIN is renewed, it remains in effect unless it is not used for three years.
If someone is eligible for an SSN, they should not renew their ITIN. Instead, they should apply for an SSN.
Once they have an SSN, they should write a letter to their local IRS office. The letter should explain that they have an SSN and they want their tax records combined under the SSN. For more information, check the IRS website.
What happens if the ITIN isn’t renewed?
If the ITIN isn’t renewed, the person using the ITIN might have problems when they submit their federal tax return. There might be a delay in tax return processing. Tax refunds might also be delayed. And, an expired ITIN can make someone ineligible for certain tax credits.
Can employees use ITINs?
Per the IRS, you cannot hire employees unless they have Social Security Numbers. You must verify new employees are legally eligible to work in the United States by gathering their SSNs before they start working.
Workers without Social Security numbers can apply by filing Form SS-5, Application for Social Security Card.
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This article has been updated from its original publish date of July 25, 2012.This is not intended as legal advice; for more information, please click here.