Process Change - US Individual Taxpayer Identification Number (ITIN)
On June 22, 2012, the IRS announced interim changes to the Individual Taxpayer Identification Number (ITIN) application process.
What is an ITIN?
An ITIN is a tax processing number issued by the IRS to individuals who are required to have a US taxpayer identification number but who do not have, and are not eligible to obtain, a US Social Security Number (SSN). Individuals with US citizenship or who possess a US green card or a valid US work permit are generally eligible for a US SSN and are not eligible for an ITIN. Individuals who do not fall into the preceding categories would be required to obtain an ITIN.
What is an ITIN used for?
The most common use of an ITIN is for foreign (non-US) nationals who have US federal tax reporting or filing requirements. As an example, a nonresident alien of the US, who earns US rental income, is generally required to file a US tax return. In order for such a tax return to be processed by the IRS, it must include an ITIN (or an application for an ITIN if the individual is filing for the first time).
How is an ITIN obtained?
In order to obtain an ITIN, individuals must complete IRS Form W-7 – Application for IRS Individual Taxpayer Identification Number. Form W-7 provides basic information about the taxpayer (ie: name, address, date of birth, nationality, etc.) and it must be accompanied by documents that prove the individual’s identity and foreign status. While some exceptions do exist, in most cases the ITIN application and supporting documentation must be attached to a US federal tax return. The ITIN is issued to the individual by the IRS as part of the tax return assessment procedures.
What has changed?
Form W-7 has not changed, however, the procedures surrounding the documents required to prove the individual’s identity and foreign status have changed.
Under the “old” rules, an applicant could prove their identity and foreign status by providing a copy of their foreign passport, as long as it was certified by a US notary or a US acceptance agent. Effective June 22, 2012, the IRS has stated that it will no longer accept the certification of the passport copy by a US notary or US acceptance agent and it will only accept a passport copy if it is certified by the issuing agency (ie: Passport Canada in the case of a Canadian passport).
As an alternative, ITIN applicants can send their original documentation, such as their Canadian passport, to the IRS with their ITIN application. For obvious reasons, few people choose to do this.
It should be noted that this new process is an interim measure and the IRS has stated that final rules will be issued before the start of the 2013 tax return filing season. Furthermore, there are certain exceptions to the interim measures that will allow individuals to follow the “old” procedures.
Contact your Collins Barrow advisor for more information on the procedures required to obtain a US ITIN as well as any other US tax matters.
Michael R. Hayward, CPA, CA, CPA (Illinois) is a partner in the Ottawa office of Collins Barrow.
Information is current to November 20, 2012. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.