In the United States, individuals can be identified for tax purposes by two main types of tax identification numbers. The first is the Social Security Number (SSN), which is available only to U.S. citizens, Green Card holders, or those with a visa granting temporary residency in the U.S. The other type of identification is the Individual Taxpayer Identification Number (ITIN).
What is an ITIN?
The Individual Taxpayer Identification Number (ITIN) is a nine-digit tax identification number used primarily for filing federal tax returns. As its name implies, the ITIN is strictly for tax purposes and cannot be used for identification by government, state, or county offices for any non-tax-related activities.
When is an ITIN Necessary?
In most cases, an ITIN is required for filing federal income tax returns. However, there are certain exceptions where an ITIN may not be necessary.
Exception 1: Third-Party Withholding on Passive Income
You might be exempt from applying for an ITIN if:
•You are a partner in a U.S. or foreign company investing in the United States and earning partnership income.
•You receive distributions such as rental income, pensions, annuities, dividends, royalties, etc., during the current tax year.
•You have an interest-bearing bank deposit account that generates income linked to your U.S. business or trade, subject to IRS reporting and federal tax withholding.
•You are a “resident alien” for tax purposes with an interest-bearing bank account subject to IRS reporting and federal withholding.
Exception 2: Other Income Sources
Individuals claiming the benefits of a U.S. tax treaty might be exempt if they receive:
•Salaries, wages, or compensation, and submit Form 8233 to the withholding agent.
•Fellowships, scholarships, or grants, and submit Form W-8BEN to the withholding agent.
•Gambling income.
Exception 3: Third-Party Reporting of Mortgage Interest
You may qualify for an exemption if you hold a home mortgage loan on U.S. real property.
Exception 4: Third-Party Withholding—Disposition by a Foreign Person of U.S. Real Property Interest
This exception applies if you are involved in the disposition of a U.S. real property interest by a foreign person.
Exception 5: Reporting Obligations under Treasury Decision 9363
If you have IRS reporting obligations under TD 9363, this exception may be relevant. To claim this, submit Form W-7 and Form 13350.
Need Help with ITIN or Unsure of Your Exemption Status?
If you have questions regarding ITIN requirements or exemptions, or if you’re unsure whether you need an ITIN, please feel free to contact us. Our team is here to provide the guidance you need.
