Top Facts You Didn’t Know About the Individual Taxpayer Identification Number (ITIN).
ITIN
ITIN and Your Taxes
The Individual Taxpayer Identification Number, also called ITIN or IRS ITIN, is a tax processing number the Internal Revenue Service (IRS) issues to ensure individuals, including undocumented immigrants, pay taxes. The ITIN applies notwithstanding if a person has a Social Security Number (SSN) or not and applies regardless of their immigration status.
The ITINs help the Internal Revenue Service (IRS) to generate billions of dollars for the federal government, money the federal government would’ve not been able to generate.
We understand how significant the IRS individual taxpayer identification number is, and this article will explain what ITINs are, who can have them, and why ITINs are used.
Let’s get started
WHAT IS AN ITIN?
An ITIN is a number the IRS issues to people to ensure they pay taxes. The number is a tax processing number and is issued to everyone, including undocumented immigrants and persons without a Social Security Number.
QUICK FACTS ABOUT THE ITIN
THE ITIN WAS CREATED PRIMARILY FOR TAX PURPOSES.
The ITIN, created in July 1996, by the IRS, was designed to help the federal government generate revenue in tax from foreign nationals and other individuals ineligible for a Social Security Number (SSN).
ITINS ARE DIFFERENT FROM SSNS
The ITIN vs. SSN argument is one that never ends. The fact is that the ITIN and the SSN are not the same. The ITIN is a nine-digit number that typically begins with the number 9 and has 7 or 8 in the fourth digit. A typical tax id number example is 9xx-7x-xxxx or 9xx-8x-xxxx.
On the other hand, a Social Security Number (SSN) is a nine-digit number issued to US citizens, permanent residents, and temporary/working residents under the Social Security Act. This number was initially made to enable the Social Security Administration to track individuals, but now it serves as a de facto national identification number for taxation purposes.
NUMEROUS IMMIGRANTS HAVE ITINS
Individuals without lawful status in the US are open to obtaining an ITIN. The reason for this is that these people are in the country and are expected to pay taxes.
Additionally, some people who are lawfully in the country, pay taxes, and are not eligible for a Social Security Number, may also obtain an ITIN.
These persons include:
Non-resident foreign nationals who own or invest in a US business and receive taxable income from their US business, but live in another country
Foreign national students who qualify as residents of the US-based on the number of days present in the country
Dependents or spouses of US citizens or lawful permanent residents
Dependents of spouses of foreign nationals on a temporary visa
ITINS AND LEGAL STATUS OR WORK AUTHORIZATION
It’s noteworthy that ITINs do not provide legal status or work authorization for persons who have it.
The identification number doesn’t provide legal immigration status and cannot be used by anyone to prove legal presence in the country.
If you’ve ever wondered, ‘Does ITIN provide work authorization?’ A fact is an identification number also doesn’t provide work authorization of any kind. It can’t be used to prove work authorization on a 1-9 form.
DO ITIN HOLDERS PAY TAXES?
Yes, ITIN holders pay taxes; however, some essential facts are noted about ITIN and tax payment.
ITINs build the tax base because it allows more people to pay into the system. IRS pointed out that in 2015 alone, 4.4 million persons paid $23.6 billion in total taxes using the ITIN.
Although ITIN holders pay tax, they’re not eligible for all of the tax benefits and public benefits received by US citizens and other taxpayers. For instance, an ITIN holder is not eligible for social security benefits. However, the good news is if the person gets a future social security number, the earnings reported with an ITIN may be counted as the amount the person is eligible to receive.
Some holders of ITIN are eligible for the Child Tax Credit (CTC). The federal legislation passed in December 2017 stated that the CTC might be worth as much as $2,000 per qualifying child, depending on the applicant’s income. This application has seen over 4 million US citizens’ children benefit from the tax credit. Note that the child is ineligible for the tax credit if a child doesn’t have an SSN.
According to the provisions of the $2 million Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law on March 27, 2020, holders of ITIN are ineligible to receive stimulus payments. This rule applies even if they filed their 2019 federal tax returns.
USES OF THE ITIN
Besides taxes, there are other uses of Individual Taxpayer Identification Number (ITIN). Some of these uses of ITIN include:
ITIN can be used to secure a driver’s license. Some states in the country allow an ITIN instead of a SSN to obtain a driver’s license, a driver’s permit, or a state identification card.
One can also use the ITIN, in place of an SSN, to open an interest-bearing bank account.
The ITIN can also be used for providing proof of residency. Immigrants who need to prove how long they’ve been in the country can file for tax return using an ITIN.
DOES THE GOVERNMENT TRACK UNDOCUMENTED IMMIGRANTS USING THE ITIN?
You should know a few things regarding ITIN and immigration.
The ITIN is not a tool for enforcing immigration. The individual taxpayer identification number and application process is designed to facilitate tax payment. The IRS doesn’t share applicants’ private information with immigration enforcement agencies.
IRS values taxpayers’ privacy. Section 6103 of the Internal Revenue Code states that the IRS cannot release taxpayers’ information for other government agencies except for providing information to the Treasury Department for investigations related to tax administration or under a court order related to a non-tax criminal investigation. This code is an essential part of the US tax system, and the fact that the IRS doesn’t share ITIN holders’ details with immigration is part of the reasons the ITIN system is successful.
HOW CAN ONE APPLY FOR AN ITIN?
To apply for an ITIN, the applicant should do the following:
The applicant must fill out a W-7 application form and submit to the IRS along with a completed tax return. It’s not compulsory to apply in person. The ITIN will be sent to the applicant through the mail, once the application is approved.
The applicant is required to submit original documents verifying identity and ‘foreign status.’ The IRS has issued 13 documents that they accept for this purpose. The submitted documents will be returned to the applicant within 60 days of receipt and processing of the W-7 form.
There are IRS Acceptance Agents and Taxpayer Assistance Centers, which are available to help applicants.
WHERE CAN I FIND MY TAX IDENTIFICATION NUMBER?
You can find your Tax Identification Number on several documents, including tax returns and forms filed with the IRS.
FINAL WORDS
The ITIN is a crucial identification number in the United States and can help certain circumstances. We hope this piece on ITIN, what it is, who is eligible to have it, and the reasons to have it, helps you.
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