Taxpayer Identification Numbers - Who Needs One?

An Individual Taxpayer Identification Number (ITIN) is a nine digit number, the Internal Revenue Service (IRS) uses as a tax processing number when people file their federal tax returns, who do not qualify for a Social Security Number (SSN) or Employer Identification Number (EIN). Although the term Taxpayer Identification Number can be used to refer to all the different tracking numbers the IRS uses to track federal tax returns, including Social Security Numbers and Employer Identification Numbers - two of the most common taxpayer identification numbers used. However, most people are referring to Individual Taxpayer Identification Numbers, when they refer to TINs. ITINs are designed for certain nonresident and resident aliens, their spouses, and dependents, who do not qualify for Social Security Numbers, to use to file their federal tax returns. To file federal tax returns, everyone needs a taxpayer identification number. Although, if you have a Social Security Number, you do not need an Individual Taxpayer Identification Number. Your Social Security Number is your taxpayer identification number. 

Who Needs an Individual Taxpayer Identification Number? 

Individual Taxpayer Identification Numbers (ITIN) are created by the Internal Revenue Service (IRS) for certain nonresident and resident aliens, their spouses, and dependents, who do not qualify for Social Security Numbers (SSN). The taxpayers can then use these ITINs to file their federal tax returns. If you qualify for a Social Security Number, you should apply and obtain your SSN to file your federal tax return, not request an ITIN.

In 2016, a new law, Protecting Americans from Tax Hikes (PATH) Act enacted by Congress in December 2015, required taxpayers to renew their ITINs, if it had not been used at least once in the past three consecutive years to file a federal tax return. Also, under this law, ITINs issued before 2013 expired and need to be renewed. If you do not need to file a federal tax return, you do not need to apply or renew your ITIN. ITINs are issued by the IRS for the sole purpose of filing federal tax returns. 

Spouses and dependents residing outside of the United States should not request an ITIN unless they qualify for a tax benefit. For example, if you take care of your dependent parent, who resides outside of the United States and allows you to claim the head of household filing status, then your dependent parent would need to apply for an ITIN, so you could list them as a dependent on your federal tax return. 

How Do You Obtain or Renew an Individual Taxpayer Identification Number? 

To request an Individual Taxpayer Identification Number (ITIN), you must complete Form W-7, IRS Application for Individual Taxpayer Identification Number. Form W-7, also, is used to renew an ITIN that has expired. With Form W-7, the IRS requires individuals to submit “documentation substantiating foreign/alien status and true identity for each individual.” For most individuals, this requires submitting your passport along with the application and additional supporting documentation. 

Dependents of taxpayers, who reside in the United States and do not have a date of entry stamped in their passport, also must provide documentation that they live in the United States. Their age will determine the type of documentation they need to submit along with their identification (usually a passport). If the dependent is under six years old, they will need to submit medical records. If they are under eighteen years old, they will need to submit school records. For dependents over the age of eighteen, they can submit a rental agreement, bank statement, or utility bill. 

If you are applying for an ITIN for the first time, you must include a completed Form W-7 and supporting documentation with your original federal tax returns that you need the ITIN to complete. You just leave the Social Security Number line blank on your tax returns. After the IRS processes your W-7 ITIN application, they will assign the ITIN(s) to your federal tax return and process the return. If you do not include your original federal tax return with your W-7, the IRS will return your ITIN application without assigning you an ITIN. 

The Bottom Line

Obtaining or renewing an Individual Taxpayer Identification Number (ITIN) can be a complicated process, if you do not follow the explicit instructions completely. The Internal Revenue Service (IRS) issues ITINs for the sole purpose of completing federal tax returns for individuals, their spouses, and dependents, who do not qualify for Social Security Numbers. If you qualify for a Social Security Number, you should apply and use your SSN to complete your tax return, not request an ITIN. 

ITINs are not used to establish immigration status, qualify for social security benefits, authorize someone to work in the United States, or obtain certain tax benefits like the Earned Income Tax Credit (EITC). However, ITINs can be used by taxpayers, who are resident or nonresident aliens and need to file federal tax returns and for their dependents who qualify. 

If you are not sure if you need an ITIN or need help completing the application, contact the tax professionals at Gudorf Tax Group to review your individual tax situation and make sure your Form W-7 and tax return is completed correctly the first time.

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