The time for gathering personal information needed to file a U.S. income tax return is at hand. Those of you who have been down this road before and have filed U.S. income tax returns in the past know the routine. For some others, however, this could be a new – and possibly overwhelming – challenge.
Each year, more people are added to the roll call of U.S. taxpayers; some knowingly and some unknowingly.
Are You a U.S. Taxpayer?
The “rule of thumb” for determining “roll call membership” is rather simple: Persons receiving taxable income from sources physically located within the United States are generally subject to reporting that income on a U.S. income tax return and paying any taxes associated with that income.
Factors such as citizenship, residency, and physical location where this receipt of “U.S.-sourced” taxable income had occurred, while seemingly important in the new taxpayer’s mind, don’t lend any weight to the matter. Only the source of the taxable income and its receipt count.
Examples of “new U.S. taxpayers” include foreign investors in a U.S. business or venture and widows or widowers whose late spouses had arranged for their pension benefits to be transferred to their survivors as an annuity.
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Tax ID Numbers – What & Why
Obviously, with millions of taxpayers registered with the U.S. Internal Revenue Service (IRS), the use of taxpayers’ names to sort out “who’s who” is out of the question. Too many similar names cause too much confusion. Keeping track of taxpayers, their tax payments, and their compliance with tax rules and regulations, then, falls onto a system of unique identification: Tax ID Numbers (TINs).
For U.S. citizens, residents (e.g., “Green Card” holders), and a select few others, TIN assignment is simple. Anyone who is eligible for a U.S. Social Security Account and its associated Social Security Account Number (SSAN) must obtain a SSAN and use it as their TIN.
Generally, for all others who are not eligible to be assigned a SSAN, things are not as simple. These U.S. taxpayers must obtain an Individual Tax Identification Number (ITIN) from the IRS. The process to do so can be complex and time-consuming, depending on the situation at hand.
The only similarity between a SSAN and an ITIN is their function as a TIN. That’s it. The differences between the SSAN and the ITIN are many, but they can be summarized in a simple statement: An ITIN is a TIN, and absolutely nothing else, period.
An ITIN guarantees nothing, it bestows no privileges, and its use is totally meaningless outside of the realm of U.S. income tax. In a way, a SSAN is everything that an ITIN is plus everything that an ITIN is not.
Whether it’s a SSAN or an ITIN, U.S. taxpayers must have a valid U.S. TIN in order to “do business” with the IRS in filing tax returns and paying any taxes.
Obtaining a U.S. TIN
Regardless of which TIN is sought, there is always a government form that must be completed, signed, dated, and submitted to the specific TIN’s issuing agency. Additionally, accompanying that government form, the TIN applicant must provide supporting evidence of his/her identity and that he/she is eligible to apply for the particular TIN.
In reality, one doesn’t apply for a SSAN. One applies for a U.S. Social Security account, and the SSAN is issued to the account holder. Generally, applicants must apply in person at a local Social Security Administration office. Applicants holding state-issued identity cards or driver’s licenses from certain U.S. States have the option of applying online. Whether in person or online, there’s “paperwork” involved.
It’s not within the purpose of this article to address U.S. Social Security issues, processes, and procedures. Further information can be obtained from the U.S. Social Security Administration’s website.
The application process for an ITIN is completely different. After all, ITINs are wholly controlled by the IRS, and that agency definitely does things differently.
At present, there is no method available to apply for an ITIN online. While “e-filing” has become vogue for many IRS-related processes, ITIN applications (and amended tax returns) are not among them. ITIN applications must be filed in paper format on an IRS Form W-7. Accompanying the Form W-7 must be supporting evidence of the applicant’s identity and the applicant’s “foreign status” (i.e., evidence that the applicant is not eligible for an SSAN).
If that’s not enough, there is an additional stipulation. ITIN applications must accompany an U.S. Individual Income Tax return being filed or, in cases of exception, must include specific proof that the applicant is required to have an ITIN. One just can’t apply for no reason.
ITIN applicants have the following options for filing their Form W-7 and supporting documents:
- Applying by mail or by an IRS approved Private Delivery Service;
- Applying in person at a designated IRS Taxpayer Assistance Center (TAC); or
- Applying through an IRS acceptance agent – either an IRS approved Acceptance Agent (AA) or Certified Acceptance Agent (CAA).
The Philippines and many Pacific Rim countries do not have an IRS TAC available. So, for ITIN applicants in these locations, Option #2 does not exist.
The Form W-7 and its associated instructions are available for downloading from the IRS website at: https://www.irs.gov.
More to Follow, Later
I’ll provide more information about the ITIN application process in an upcoming article. There’s just too much information involved to relate all of it here in a single article. I will close with a few items of importance, however, that I’ll repeat in the next article.
Regarding the supporting evidence documents:
- The IRS maintains a list of specific documents that can be used in support of an ITIN application, designating which can be used to establish identity and which can be used to establish “foreign status.”
- Documents used to support the ITIN application must be either “original” documents – not photocopies – or copies that have been certified by the document’s issuing agency. Sorry, notarized documents are not accepted.
- A valid Philippine passport (or a copy of a valid passport certified by the Philippine Department of Foreign Affairs [DFA]), is the only “stand alone” document that, by itself, can be used to establish both identity and “foreign status.” Otherwise, separate documents must be used for each category.
For now, I’m sure that the above is more than enough to digest at one sitting. As an IRS authorized CAA in the Philippines (1 of 3), I do get called upon for ITIN assistance quite regularly. I know that, as you read these final words, your head is ready to start spinning!