Every person and business that files a federal tax return in the United States needs to have a valid tax identification number. SSN, EIN, and ITIN are most commonly used. We’ll briefly touch on SSN and EIN, which are fairly straightforward, but our purpose here is to explain ITIN as simply as we can.
SSN vs EIN for Filing Taxes
Generally speaking, U.S. citizens have a social security number (SSN) which is used for lots of things, including as a taxpayer identification number for personal taxes. An employer identification number (EIN) is kind of the same thing, but for a business. That’s pretty straightforward.
But what if you aren’t eligible for a SSN for any variety of reasons. And yet the IRS is telling you to file taxes and you need a taxpayer identification number for the form. You have an EIN for your business, but nothing for your personal taxes. Enter ITIN.
ITIN for Filing Taxes
Do not apply for an ITIN if you have a SSN or are eligible to receive one.
Reach out to your tax accountant to see if you require an ITIN. No point in stressing over this if you don’t even need one. Again, if you have a social security number, you do not need to apply.
What is an ITIN?
ITIN (Individual Taxpayer Identification Number) is a 9 digit number the IRS issues for U.S. federal tax purposes, in the event that you do not qualify for a social security number (SSN).
Side note: It’s interesting that there are more searches online for ITIN number than simply ITIN. We get it. It certainly does make it easier to understand, but try not to use number after ITIN if you can help it. It’s already in the name.
Who needs an ITIN?
Any individual who isn’t eligible to get an SSN but must furnish a taxpayer identification number for U.S. tax purposes or to file a U.S. tax return needs an Individual Taxpayer Identification Number. There are many scenarios that may fall under this category. You will want to reach out to your tax pro to see if you require one.
There are many situations that indicate you have a federal tax purpose and therefore need to file a federal tax return. However, generally a tax return that contains all zero entries will not show a federal tax purpose. In this case, you don’t need to file a tax return or apply for an ITIN.
You do have a federal tax purpose when you:
- Are legally required to file a U.S. federal income tax return
- Want to claim a refund or allowable tax benefit or report income by filing a tax return*
- Can be claimed as a spouse or dependent for an allowable tax benefit
- Must provide a tax identification number for another federal tax purpose
*If you earned income but don’t owe tax or aren’t required to file, you may want to file a tax return to get money back. You could be eligible for a refund or a refundable tax credit.
Reasons to apply for an ITIN
You may need an ITIN if you’re a:
- Nonresident alien claiming a tax treaty benefit
- Nonresident alien filing a U.S. federal tax return
- Resident alien filing a U.S. federal tax return
- Dependent or spouse of a U.S. citizen/resident alien
- Nonresident alien student, professor or researcher filing a U.S. federal tax return or claiming an exception
- Dependent or spouse of a nonresident alien U.S. visa holder
When is the best time to apply for an ITIN?
If you have not already received an ITIN the best time to apply is at the time that you file your tax return.
I agree with you, that doesn’t make much sense. Issuing Individual Taxpayer Identification Numbers is another way the IRS shows their love for over complicating processes.
The reason it’s best to apply for one at the same time you file your tax return is it proves there is a need for it and increases the likelihood that your application will be accepted.
This means that until you receive your ITIN you will be required to paper file your tax return. Unfortunately, paper filing a return leaves us at the mercy of the IRS and their slow processing time. Sometimes these returns can take up to 9 months for them to process. But the good news is that won’t always be the case.
You can’t electronically file (e-file) a return using an ITIN in the calendar year it is assigned or if you do not have an ITIN issued. However, once your ITIN is assigned, you can e-file returns in the following years. For example, if you apply for and receive an ITIN this year, you may not e-file any tax return using that number (including prior-year returns) until next year.
Expired ITIN and Renewing It
If you happen to have already been issued an ITIN in the past, there are some important things to note regarding its expiration and renewal process.
You only need to renew your ITIN if it is expired.
If your ITIN was not included on at least one U.S. federal tax return for the last 3 consecutive tax years, it expires on December 31 of the third consecutive tax year, and must be renewed before being used again on a U.S. federal tax return.
If your it was assigned before 2013 and was never renewed, you’ll need to submit a renewal application with your U.S. federal tax return.
If your ITIN is only being used on information returns for reporting purposes, you do not need to renew it currently. However, if your situation changes in the future and you need to file a U.S. federal tax return, you will need to renew the ITIN at that time.
How to apply for an ITIN?
If you’re a DIYer, you can apply for your ITIN by filling out a W-7 and submitting it along with a copy of your most recent tax return to the IRS.
If you’d rather not deal with the IRS as much as possible, then Incite can help with this process! You’d have to sign up for our tax services, if you aren’t a client already, in order to add this on and have Incite apply for you.
If you ARE A CLIENT and interested in having Incite apply for your ITIN, please reach out to your tax professional for additional information and pricing.
