The definition of an ITIN number is the number of the American taxpayer (Individual Tax Identification Number). This is in reference to an identification number that is assigned for each person who is not an American citizen, in order to identify them when reporting to the authorities.
In fact, any person with investments or who is purchasing properties in the United States needs this type of identification, so it should be issued as soon as possible. In this guide, we will explain what an ITIN is when it is needed, and how to issue one.
What is an ITIN, when is it needed, and how can you issue one?
ITIN is the American taxpayer’s identification number, and it is needed when a tax deduction is required when there is a certain investment in the United States, or when there is a partnership with a citizen who is not American (LLC / LP). Likewise, when there is real – estate in the United States there is a requirement to report on it for the purpose of paying taxes.
If the number is not in use for a period of three years, it is automatically canceled, so there is no worry about issuing it without using it. Even in cases where it becomes apparent that there is an advantage to submitting tax returns as a citizen together with a partner who is not an American citizen, such an identification number should be issued for him or her as well.
What Does an ITIN Look Like?
This number is nine digits long, and it constitutes the taxpayers identification number.
Through Where is the Number Issued?
The number is issued by the IRS, and it is critical and meaningful on every tax return that is submitted, in order to receive different perks or in order to attribute the paid taxes to a specific person.
How is it Issued?
In these cases, and because the tax laws and different demands of the states are complicated, it is recommended to consult with experts in the field of American taxes, who could recommend or recommend against continuing issuing the number and the meaning it has for owing taxes.
Since it is impossible to report or pay taxes without this identification number, it is impossible to ignore this requirement or avoid issuing this number.
For additional assistance and help while reporting on taxes or issuing the identification number, consult with a Mas America consultant who is an expert in this topic. Consultation of this type helps, in many cases, to accelerate the process, shorten the waiting times, and make the entire process efficient.
The Paperwork Needed to Issue an American Taxpayer Number
In order to issue an ITIN number, a request must be submitted to the IRS, with the request including personal information, passport, and a form explaining the reason for the request. Usually, the request is checked and the proof is needed to verify the identity of the person making the request, sometimes even by experts from the IRS.
If the person making the request was in the past in possession of a social security number, for example, while being a student, they are not required to have an ITIN and can use their old number.
The request process is complex, complicated, and could take a long time, and that is why the recommendation is to arrive with all the needed paperwork in order to attempt to shorten the submission time.
It is important to ensure that before making the request submission, you have a photocopy of your passport and your visa to the United States (if there is one), and a full address including a location where the number could be sent by mail.
Sometimes it would be easier to turn to a professional company that specializes in these types of approvals specifically, and in American taxes in general, in order for them to submit the request and follow the progress so that they could receive the number by e-mail or other digital means.
Confirming Personal Information
According to federal law, there is a requirement to verify the truthfulness of the personal details of the person submitting the request. Usually, the verification of these details is done in a number of ways.
One is the identification of the person by an IRS agent who is a verified agent. Israeli companies who specialize in American taxes could complete this stage by using people from the company or other means that would shorten the waiting time for approval.
A second option for personal identification is by appearing at the American embassy, after setting a time for an interview. The third option is submitting a number of documents that confirm and prove identities such as a birth certificate, a passport, a driver’s license, and other documents that could aid in the handling of the request.
The Possible Processes for Issuing an ITIN Number
There are two main options through which an American taxpayer number can be issued. The first is the option to submit a request to issue a number while submitting the first tax return.
In this case, the IRS can process the request together while examining the tax return. In this option, it is required to wait until the request for payment and report until the end of the tax year and then submit all the forms.
The second option is to request the number to be issued even before the request to report on taxes so that in this case it is required to submit the partnership form that includes all the information on the partnerships (or the investment done in the United States, including securities, real – estate, and so on), EIN number, and percentage of ownership in the partnership.
The Advantages and Meaning of an ITIN Number
Past the requirement and the need to issue an identification number for the taxpayer in the United States, there are also a number of clear advantages:
- Options to receive tax refunds – withholding tax is done at a higher rate than is required in the final tax report. That way in the withholding tax, a rate of 20 – 37 percent of yielding income and 30 percent of other income in the United States (for example in real – estate or an investment portfolio).
- The right to more comfortable tax brackets, when the property is held by the taxpayer for a period of time exceeding a year.
- Lower taxes by recognizing different expenses that are for tax purposes.
- Receiving tax refunds when, for example, selling properties. Usually, when non-American citizen sells a property, they will be required to pay a tax of 15 percent of the property’s worth. When this citizen submits a tax return, they can request that the deduction be recognized as a tax expense.
These advantages could convince the unconvinced that they indeed should submit a tax report, and that is why you should issue the identifying number in the fastest possible way.
A few pointers you must know before issuing an ITIN identification number
Before getting the ITIN number issued, it is recommended to consider a few main things. The main one is that the number does not afford a person any other right beside an identification number for the financial authorities of the United States.
It does not allow a person to work in the United States and does not substitute a green card. Additionally, it does not supply any advantages or different rights for the immigration department and not social security.
In addition, the average time for the issuing of an ITIN number is around three months more or less, but could also be up to six months, so that should be taken into account to avoid situations where there will be a delay in the tax reports.
That being said, issuing this identification number is a one–time process, unless three to five years have passed since it was used, and so this process needs to be properly executed in order to work accordingly with the American authorities.
In Summation
Every person who is not an American citizen, but is an investor in the United States and is required to report on their taxes, has to have an ITIN number issued.
Along with the payment and report requirement, this number helps in lowering taxes in certain situations (for example recognizing recognized expenses, lowering tax rates when the investment or real estate ownership goes on for over a year, and more).
The process of getting a number issued is organized and clear, but it should be taken into consideration that it takes a long time, so it is best to prepare ahead of time for it so there are no tax returns submitted late and the conduct with the American authorities will be good and proper.
Since experience and knowledge are required when dealing with authorities and the ways and options of getting a number of issues, it is recommended to turn to experts in American taxation, that can recommend more efficient ways to get a number issued specifically and the whole process in general.
Usually, the advantages included in turning to such a company abound and they include, among others, a faster processing time. You are welcome to turn to us at Mas America, we would be happy to help you too.
