All you need to know about ITIN

Taxation, or the levying of tax is an important part of every nation's economic scenario as it is one of the major sources of revenue for a Government. While salaried individuals get their salaries after deduction of the relevant tax, self-employed individuals have to file their tax returns themselves. US is a racially diverse country where individuals of various nationalities co-exist. While majority of US citizens qualify for a Social Security Number, many, who are either dependent spouse of US citizens or non-residents, are not eligible to avail the Social Security Number (SSN). When such individuals, who do not have a SSN, have federal tax filing requirements, they require an Individual Taxpayer Identification Number (ITIN) for the same. So, what is an ITIN?

As is evident from the name, ITIN is a number which is allotted to individuals who wish to file their taxes with the US Government. This number is unique and is issued by the Internal Revenue Service (IRS). The number acts as the taxpayer's identification number and is a 9-digit number starting with 9. Who can avail an ITIN?

The Individual Taxpayer Identification number is issued to individuals who are not qualified to obtain a Social Security Number but have to report their taxes. The individuals who are eligible to avail an ITIN are:

  • The spouse or dependent of a US citizen or US resident who is a citizen of another country.
  • The spouse or dependent of a non-resident US Visa holder
  • A non-resident who has a source of income in US and thus has to file taxes in US
  • Other US citizens who are not qualified to avail a SSN but have to file their taxes in the US
Spouses and dependents of US citizens, residents or non-residents need an ITIN for being named as a dependent in the taxpayer's tax returns.

So, individuals not having a SSN who are required to file their taxes have to avail an ITIN for the purpose of tax filing and processing. SSN and ITIN are mutually exclusive. An individual having a SSN cannot have an ITIN and vice-versa.

How to avail an ITIN?

The Internal revenue Service (IRS) is the authority which issues the unique ITIN to every individual. For applying and availing an ITIN, individuals can either apply directly to the IRS or through the Certified Accepted Agents (CAAs) who are authorized to process the applications for issuing the ITIN. The application form (W-7) is available online which should be downloaded and duly filled. The hard copy of the form, a valid Passport and other relevant documents are to be mailed to IRS for availing the ITIN. If the form is sent directly to the IRS, the original supporting documents are required to be mailed along with the form. However, if one is engaging the services of any CAA, the form and copies of the supporting documents would suffice. After processing, the ITIN is sent through mail within 7 weeks.

Limitations of an ITIN

Though the ITIN is required for filing tax, there are certain limitations associated with it which are as follows:

  • The Earned Income Tax Credit cannot be claimed using an ITIN as it requires a valid SSN.
  • The holder of an ITIN cannot avail a SSN.
  • The ITIN is solely for the purpose of federal tax filing and cannot be used elsewhere.
  • The ITIN could not authorize the individual to work in the US.

Benefits of ITIN
Despite its limitations, ITIN also has some benefits which are enumerated below:
  • For claiming a tax refund, the ITIN is required
  • To name any family member as a dependent in the taxpayer's returns, the member's ITIN is required.
  • It is a legal requirement for tax-filing for individuals not having a SSN.
Validity of an ITIN

As per changed laws and regulations, the Individual Taxpayer Identification Number (ITIN) is valid for 5 years after it is issued. ITINs issued before 2013 would expire in 2016 and individuals who wish to file their taxes in 2017 would have to renew the same. Furthermore, ITINs on which no tax filing has been done in the last 3 years would also become invalid and need renewal to file taxes in the next year.

So, an ITIN is an important requirement for every individual filing tax in the US who does not have a SSN. Now you know all about the ITIN and the next time you have to file your taxes, you would know exactly what would be required.