Individual Taxpayer Identification Numbers

The federal tax laws require individuals with U.S. income to comply with U.S.
income tax filing obligations regardless of their immigration status or lack of legal immigration status. To comply with U.S. income tax filing requirements, an individual must have a U.S.
Pre-tax Return Applications Many foreign nationals have a federal tax administrative requirement for an ITIN prior to submitting their tax return. For example, many foreign nationals receive income subject to withholding taxes in which the income and taxes are reported on information taxpayer identification number (TIN). The TIN for a U.S. citizen is a U.S. Social Security number (SSN). Generally, only foreign nationals who are authorized to work under the U.S. immigration laws are eligible to apply for an SSN. In 1996, the IRS introduced the ITIN to provide individuals who are not eligible for an SSN with a means to comply with the tax laws. An ITIN is a nine-digit tax identification number (TIN) issued by the IRS. The number always begins with the number 9 and has a 7 or 8 in the fourth digit, e.g., 9XX7X-XXX.
Individuals Eligible for ITINs The following individuals, who are not eligible to apply for an SSN, are eligible to apply for an ITIN for a federal tax administrative purpose: a. Nonresident alien required to obtain an ITIN to claim a tax treaty benefit.
b. Nonresident alien filing a U.S. tax return.
c. U.S. resident alien (based on days present in the United States filing a U.S. tax return).
d. Dependent of a U.S. citizen/resident alien.
e. Spouse of a U.S. citizen/resident alien.
f. Nonresident alien student, professor, or researcher filing a U.S. tax return or claiming an exception.
g. Dependent/spouse of a nonresident alien holding a U.S. visa.
h. Other (indicate pre-tax return exception number) The letters correspond to the category letters on the Form W-7, Application for IRS Individual Taxpayer Identification Number. Individuals claiming a tax treaty benefit must include the treaty country and article number under which the benefit is claimed following category "h." Required Documentation Applicants must submit documentation with their Form W-7 that substantiates the information provided on the form such as a valid foreign passport.
The passport information such as the name, date of birth, and country of citizenship, must be the same as the information provided on Form W-7.
Foreign nationals who do not submit a valid foreign passport must provide at least two or more of twelve approved documents listed in the Form W7 instructions that are current and that verify identity with a name and photograph, and support the individual's claim of foreign status.
The Form W-7 instructions state that the individual submit copies of original documents if the copies are 1) certified by the issuing agency or official custodian of the original record or 2) notarized by a U.S. notary public legally authorized within his or her local jurisdiction to certify that the document is a true copy of the original. To notarize a document, the notary must see the valid, unaltered original document and verify that the copy conforms to the original. The instructions note that notaries public are available at U.S. embassies and consulates worldwide. Foreign notaries are acceptable as outlined by the Hague Convention.
Application Procedures Generally, individuals need to submit ITIN applications with the original tax return. Foreign nationals requiring an ITIN for the tax return for themselves and/or their dependents must submit their Form W-7 application(s) and required documentation with their original U.S. tax return to: Internal Revenue Service ITIN Operation, P.O. Box 149342 Austin, TX 78714-9342 The Form W-7 instructions caution such taxpayers not to use the address in their tax return instructions.
returns such as Form 1042-S, 1099-INT, 8805, or 8288, 8288-A or 8288-B. Also, under new regulations introduced in 2001, exemptions from withholding tax under an income tax treaty, except on income from publicly traded investments, must be claimed on a withholding certificate (Form 8233, W-8BEN, etc.) that includes a TIN.
The Form W-7 instructions issued in January 2007 include a list of four expanded exceptions that allow pre-tax return ITIN applications by individuals with income or expense subject to third-party reporting and by recipients claiming tax treaty benefits. For example, pre-tax return exceptions now include recipients of a taxable scholarship or fellowship grant subject to thirdparty withholding or tax exempt under a treaty.
Instructions for Form W-7 include a helpful chart explaining the additional forms and letters that foreign nationals must submit for a pre-tax return ITIN application.
The Ten Rules Of U.S. Taxation (Courtesy Paula N. Singer, Esq.) The general rule of income taxation is that income is taxable where the economic activity occurs.
Rule #1: All compensation for services performed in the United States is subject to U.S. taxes unless an exception applies.
Rule #2: How an individual performing services in the United States is taxed depends on his or her U.S. tax status - resident or nonresident. These are tax terms not immigration terms.
Rule #3: How an individual performing services in the United States is taxed depends on his or her U.S. tax status - resident or nonresident. These are tax terms not immigration terms.
Rule #4:An immigrant, like a U.S. citizen, is subject to U.S. tax on worldwide income, even if the individual resides and works abroad, unless an exception applies.
Rule #5: A resident is subject to U.S. tax on worldwide income regardless of the currency or location of payment. A nonresident is subject to U.S. tax on U.S. source income and income effectively connected to a U.S. trade or business regardless of the source. Compensation for services performed in the United States is U.S. source income regardless of the currency or location of payment unless an exception applies.
Rule #6: The United States, like foreign governments, collects taxes on the income of nonresidents through withholding taxes. The U.S. withholding tax is 30 percent unless an exception applies. One exception is wages subject to wage withholding.
Rule #7: An employer is required to withhold federal and state income taxes, and social security and Medicare taxes, on compensation paid for employment services performed in the United States unless an exception applies. This rule applies to both U.S. and foreign employers.
Rule #8: All payments made by an employer to or on behalf of an employee, including cash and the fair market value of benefits-in-kind, are wages subject to withholding taxes unless an exception applies.
Rule #9: In addition to meeting the conditions for an exception, an individual must document the exception usually by submitting a completed form, signed under the penalties of perjury, to the payer or to the IRS; otherwise the exception does not apply.
Rule #10: The IRS enforces withholding by collecting the tax, plus penalties and interest, from the payer who fails to withhold or to collect the necessary form for the exemption from withholding.
Additional penalties are imposed for the failure to report the income.
Michael Phulwani is a prominent attorney admitted to practice law in New York, New Jersey and India. He practices immi- gration and nationality law and visa matters in the USA and abroad. He is a frequent lecturer on immigration law and co-hosts several TV and radio programs on immigration and legislation and answer questions from our readers. All questions should be forwarded to Michael Phulwani, 74-09 37th Avenue, Suite 315, Jackson Heights, NY 11372 Courtesy of Paula N. Singer, Esq. The federal tax laws require individuals with U.S. income to comply with U.S. income tax filing obligations regardless of their immigration status or lack of legal immigration status. To comply with U.S. income tax filing require- ments, an individual must have a U.S. Pre-tax Return Applications Many foreign nationals have a federal tax administrative requirement for an ITIN prior to submitting their tax return. For example, many foreign nationals receive income subject to withholding taxes in which the income and taxes are reported on information taxpayer identification number (TIN). The TIN for a U.S. citizen is a U.S. Social Security number (SSN). Generally, only foreign nationals who are authorized to work under the U.S. immigration laws are eligible to apply for an SSN. In 1996, the IRS introduced the ITIN to provide individuals who are not eligible for an SSN with a means to comply with the tax laws. An ITIN is a nine-digit tax identification number (TIN) issued by the IRS. The number always begins with the number 9 and has a 7 or 8 in the fourth digit, e.g., 9XX- 7X-XXX. Individuals Eligible for ITINs The following individuals, who are not eligible to apply for an SSN, are eligible to apply for an ITIN for a federal tax administrative purpose: a. Nonresident alien required to obtain an ITIN to claim a tax treaty benefit. b. Nonresident alien filing a U.S. tax return. c. U.S. resident alien (based on days present in the United States filing a U.S. tax return). d. Dependent of a U.S. citizen/resident alien. e. Spouse of a U.S. citizen/resident alien. f. Nonresident alien student, professor, or researcher filing a U.S. tax return or claiming an exception. g. Dependent/spouse of a nonresident alien hold- ing a U.S. visa. h. Other (indicate pre-tax return exception num- ber) The letters correspond to the category letters on the Form W-7, Application for IRS Individual Taxpayer Identification Number. Individuals claiming a tax treaty benefit must include the treaty country and article number under which the benefit is claimed following category "h." Required Documentation Applicants must submit documentation with their Form W-7 that substantiates the information pro- vided on the form such as a valid foreign passport. The passport information such as the name, date of birth, and country of citizenship, must be the same as the information provided on Form W-7. Foreign nationals who do not submit a valid for- eign passport must provide at least two or more of twelve approved documents listed in the Form W- 7 instructions that are current and that verify iden- tity with a name and photograph, and support the individual's claim of foreign status. The Form W-7 instructions state that the individ- ual submit copies of original documents if the copies are 1) certified by the issuing agency or offi- cial custodian of the original record or 2) notarized by a U.S. notary public legally authorized within his or her local jurisdiction to certify that the doc- ument is a true copy of the original. To notarize a document, the notary must see the valid, unaltered original document and verify that the copy con- forms to the original. The instructions note that notaries public are available at U.S. embassies and consulates worldwide. Foreign notaries are accept- able as outlined by the Hague Convention. Application Procedures Generally, individuals need to submit ITIN appli- cations with the original tax return. Foreign nationals requiring an ITIN for the tax return for themselves and/or their dependents must submit their Form W-7 application(s) and required docu- mentation with their original U.S. tax return to: Internal Revenue Service ITIN Operation, P.O. Box 149342 Austin, TX 78714-9342 The Form W-7 instructions caution such taxpayers not to use the address in their tax return instruc- tions. returns such as Form 1042-S, 1099-INT, 8805, or 8288, 8288-A or 8288-B. Also, under new regula- tions introduced in 2001, exemptions from with- holding tax under an income tax treaty, except on income from publicly traded investments, must be claimed on a withholding certificate (Form 8233, W-8BEN, etc.) that includes a TIN. The Form W-7 instructions issued in January 2007 include a list of four expanded exceptions that allow pre-tax return ITIN applications by individuals with income or expense subject to third-party reporting and by recipients claiming tax treaty benefits. For example, pre-tax return exceptions now include recipients of a taxable scholarship or fellowship grant subject to third- party withholding or tax exempt under a treaty. Instructions for Form W-7 include a helpful chart explaining the additional forms and letters that foreign nationals must submit for a pre-tax return ITIN application. The Ten Rules Of U.S. Taxation (Courtesy Paula N. Singer, Esq.) The general rule of income taxation is that income is taxable where the economic activity occurs. Rule #1: All compensation for services performed in the United States is subject to U.S. taxes unless an exception applies. Rule #2: How an individual performing services in the United States is taxed depends on his or her U.S. tax status - resident or nonresident. These are tax terms not immigration terms. Rule #3: How an individual performing services in the United States is taxed depends on his or her U.S. tax status - resident or nonresident. These are tax terms not immigration terms. Rule #4:An immigrant, like a U.S. citizen, is sub- ject to U.S. tax on worldwide income, even if the individual resides and works abroad, unless an exception applies. Rule #5: A resident is subject to U.S. tax on world- wide income regardless of the currency or location of payment. A nonresident is subject to U.S. tax on U.S. source income and income effectively con- nected to a U.S. trade or business regardless of the source. Compensation for services performed in the United States is U.S. source income regardless of the currency or location of payment unless an exception applies. Rule #6: The United States, like foreign govern- ments, collects taxes on the income of nonresidents through withholding taxes. The U.S. withholding tax is 30 percent unless an exception applies. One exception is wages subject to wage withholding. Rule #7: An employer is required to withhold fed- eral and state income taxes, and social security and Medicare taxes, on compensation paid for employ- ment services performed in the United States unless an exception applies. This rule applies to both U.S. and foreign employers. Rule #8: All payments made by an employer to or on behalf of an employee, including cash and the fair market value of benefits-in-kind, are wages subject to withholding taxes unless an exception applies. Rule #9: In addition to meeting the conditions for an exception, an individual must document the exception usually by submitting a completed form, signed under the penalties of perjury, to the payer or to the IRS; otherwise the exception does not apply. Rule #10: The IRS enforces withholding by col- lecting the tax, plus penalties and interest, from the payer who fails to withhold or to collect the neces- sary form for the exemption from withholding. Additional penalties are imposed for the failure to report the income.
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Michael Phulwani is a prominent attorney admitted to practice law in New York, New Jersey and India. He practices immigration and nationality law and visa matters in the USA and abroad. He is a frequent lecturer on immigration law and co-hosts several TV and radio programs on immigration and legislation and answer questions from our readers. All questions should be forwarded to Michael Phulwani, 74-09 37th Avenue, Suite 315, Jackson Heights, NY 11372
Courtesy of Paula N. Singer, Esq.
Published in DESI TALK