There are two types of tax identification numbers in the United States for individuals. The first is the Social Security Number which can be obtained only if the person is a US citizen, has a Green Card or has a visa that provides him/her with a temporary residency in the US. The other number is Individual Tax Identification Number.
Individual Tax Identification Number, which is abbreviated as ITIN, is a nine digits tax identification number used in the US especially for when filing tax returns. As the name suggests, ITIN is a tax identification number; therefore, it is used only for tax purposes. It cannot be used by any government or state or county office for any other purpose than taxation.
As for ITIN’s necessity,in the cases of federal income tax return, ITIN application is generally necessary. However, there are some exceptions.
Exception 1 – Third Party Withholding on Passive Income
- If you are a partner of a US or foreign company that invests in the United States and gets partnership income
- During the current tax year of income, people who are receiving distributions such as rental income, pensions, annuity income, dividends, royalties etc.
- People who have opened an interest-bearing bank deposit account generating income efficiently linked to their US business or trade and is subject to IRS reporting and federal tax withholding
- “Resident aliens” for tax purposes and have opened an interest-bearing bank deposit account generating income subject to IRS reporting and federal tax withholding
Exception 2 – Other Incomes
- People who claim the benefits of a US tax treaty and receive any of the following below:
- Salary, wages, compensation, Honoraria payments and submitting Form 8233 to the withholding agent is necessary
- Fellowships, scholarships and grants and submitting Form W-8BEN to the withholding agent is necessary
- Gambling income
Exception 3 – Third-Party Reporting of Mortgage Interest
- People with a home mortgage loan on real property located in the US are eligible to claim Exception 3.
Exception 4 – Third-Party Withholding—Disposition by a Foreign Person of U.S. Real Property Interest
- If you are a party to a disposition of a United States real property interest by a foreign person, then this exception might apply.
Exception 5 – Reporting Obligations under TD (Treasury Decision) 9363
- If you have the IRS reporting obligation under TD 9363 then this exception might apply. If you are an eligible to claim Exception 5, you must submit Form W-7 and Form 13350.
Do you have any questions concerning ITIN or you are not sure whether you are exempt from getting a ITIN? Please do not hesitate to contact us!