What are the ITIN Exceptions?

It would be appropriate to answer questions such as what an ITIN number is and why it is obtained before discussing ITIN exceptions. ITIN, which means “Individual Taxpayer Identification Number.” It is used by individuals who are not eligible for or do not have a Social Security Number (SSN) in the United States but are still required to file taxes. The IRS (Internal Revenue Service) issues individual tax identification numbers, which consist of nine digits and begin with the number 9.

ITIN numbers, which have been in use since 1996, are relevant to individuals who are obligated to file federal income tax returns in the United States, regardless of whether they live there or not. As a result, it is not dependent on immigration status. Obtaining an ITIN alone does not confer rights such as the ability to earn income or work in the United States. It is also particularly important for LLC (Limited Liability Company) owners or those planning to start one.

Who Should Have an ITIN?

The IRS (Internal Revenue Service or Tax Administration) developed the ITIN number to facilitate individuals who do not have an SSN but are still required to file federal tax returns. The main situations where an ITIN is required are:

• Foreign individuals residing in the US who are not eligible for an SSN and are required to file a tax return.
• Foreign individuals residing outside the US who are required to file a tax return.
• Foreign individuals who have resided in the US for a period of time and are required to file a tax return.
• A foreign spouse or dependent of a US citizen.
• A spouse or dependent of a foreign resident with a visa (in the US).
• Foreign academic researchers or students who are required to file a tax return in the US.
• Individuals who need to use online payment systems like PayPal.

How to Obtain an ITIN Number?

ITIN applications can be submitted at any time of the year. Consulting firms that handle the necessary procedures on behalf of applicants for ITIN numbers make things easier. This way, the seemingly complex application process can be more easily navigated for individuals with commercial and legal activities in the US. The IRS does not accept electronic applications for ITINs.

The ITIN application process first begins with obtaining a W-7 form from the IRS. The completed W-7 form must be sent to the IRS along with a passport or foreign status document. The documents must be valid. Before 2012, it was sufficient to send a notarized copy of the passport. However, with the change, the original passport that has not expired must be sent.

The IRS returns the W-7 form to the address indicated on the form within 60 days of receiving the originals of the required documents. For documents that are not returned, it is possible to reach the IRS at 800-829-1040 (US) and 267-941-1000 (outside US). You can also increase your chances of approval by including a current US visa, tax return form, and a document introducing yourself and your company.

If the applicant has plans to travel to the US, they can apply in person by making an appointment with the IRS. This will eliminate the problem of proving the person’s identity. It also eliminates the need to send originals of documents such as passports. The application result is again sent to the address that the applicant will indicate on the form.

How to Submit Your ITIN Application to the IRS?

By Mail:

Mail Form W-7, your tax return (if applicable) or other documents required by an exception, and the documents previously described under Supporting Document Requirements to:

Internal Revenue Service

ITIN Operation

P.O. Box 149342

Austin, TX 78714-9342

Do not use the mailing address on your tax return instructions if you are mailing your application.

By Private Delivery Service:

If you are using a private delivery service, send your Form W-7, your tax return (if applicable) or other documents required by an exception, and the documents previously described under Supporting Document Requirements to:

Internal Revenue Service

ITIN Operation

Mail Stop 6090-AUSC

3651 S. Interregional, Hwy 35

Austin, TX 78741-0000

The private delivery service can tell you how to obtain written proof of your mailing date.

In Person:

You can apply for your ITIN number by visiting designated IRS Taxpayer Assistance Centers (TACs). They can verify originals and certified copies from the issuing agency of documents for primary and secondary applicants and their dependents. For dependents, TACs can verify passports, national identity cards, and birth certificates. 

Through an Acceptance Agent:

You can also apply through one of two types of acceptance agents authorized by the IRS:

• Acceptance Agent (AA)
• Certifying Acceptance Agent (CAA)

Acceptance Agent (AA). An Acceptance Agent (AA) can help you complete and file Form W-7. To get a list of agents, visit https://www.irs.gov/individuals/international-taxpayers/acceptance-agent-program and type “acceptance agent program” in the search box. 

Certifying Acceptance Agent (CAA). A Certifying Acceptance Agent (CAA) can verify originals and certified copies from the issuing agency of documents for primary and secondary applicants and their dependents, except for foreign military ID cards. 

What Are the Exceptional Circumstances For An ITIN?

There are certain ITIN exceptions to the ITIN requirement for tax filing. If you meet any of the criteria listed below, you may not need to get an ITIN.

ITIN Exception 1 – Third-Party Withholding on Passive Income

• Partners of a U.S. or foreign corporation that invests in the United States and earns partnership income.
• Individuals who receive distributions such as rental income, pensions, annuities, dividends, royalties, etc., during the current tax year.
• Individuals who open an interest-bearing bank account that earns income effectively connected with a U.S. trade or business and are subject to IRS reporting and federal tax withholding.
• “Resident aliens” for tax purposes who have opened an interest-bearing bank account that earns income subject to IRS reporting and federal withholding tax.

ITIN Exception 2 – Other Income

Individuals who claim the benefits of a U.S. tax treaty and receive any of the following:

• Wages, salaries, and compensation and are required to submit Form 8233 to the withholding agent
• Scholarships, fellowships, and grants and are required to submit Form W-8BEN to the withholding agent
• Gambling winnings

ITIN Exception 3 – Third-Party Reporting of Mortgage Interest

• Individuals who have a home mortgage loan for real property located in the United States

ITIN Exception 4 – Third-Party Withholding – Sale by a Foreign Person with a U.S. Real Property Interest

• Individuals who are parties to the transfer of real property rights in the United States by a foreign person

ITIN Exception 5 – Reporting Obligations under TD (Treasury Decision) 9363

Individuals who have IRS reporting obligations under TD 9363. If you meet the criteria to claim this exception, you must complete Form W-7 and Form 13350.