Legal Definitions - Individual Taxpayer Identification Number (ITIN)

An Individual Taxpayer Identification Number (ITIN) is a unique nine-digit tax processing number issued by the U.S. Internal Revenue Service (IRS). It is specifically designed for individuals who are required to file U.S. federal tax returns or furnish a federal tax identification number but are not eligible to obtain a Social Security Number (SSN).

Essentially, an ITIN allows foreign nationals and certain other individuals, such as resident aliens or dependents of U.S. citizens/residents, to comply with their U.S. tax obligations even if they do not have an SSN. It ensures that the IRS can process their tax returns and payments.

It is crucial to understand that an ITIN serves solely for tax purposes. It does not:

• Grant immigration status or provide legal authorization to live or work in the United States.
• Make an individual eligible for Social Security benefits.
• Change an individual's immigration status.

Individuals typically apply for an ITIN by submitting Form W-7, Application for IRS Individual Taxpayer Identification Number, along with their federal income tax return and supporting documents that prove their identity and foreign status.

Here are a few scenarios illustrating when an ITIN might be necessary:

• Example 1: Foreign Investor Receiving U.S. Income

  Maria is a citizen and resident of Spain who owns shares in several U.S. companies. She receives dividend income from these investments. Although she lives outside the U.S., her U.S.-sourced income is subject to U.S. tax withholding, and she may need to file a U.S. tax return to claim treaty benefits or report her income correctly. Since Maria is not eligible for an SSN, she would apply for an ITIN to fulfill her U.S. tax reporting requirements for her investment income.

• Example 2: Dependent of a U.S. Resident Alien

  Dr. Lee is a research scientist from South Korea working in the U.S. on a work visa, and he has an SSN. His elderly mother, who is not a U.S. citizen or resident for tax purposes and does not have an SSN, comes to live with him in the U.S. Dr. Lee wishes to claim his mother as a dependent on his U.S. tax return, as she meets the dependency tests. To do so, his mother needs an identification number. Since she is not eligible for an SSN, she would apply for an ITIN so Dr. Lee can properly claim her as a dependent on his tax filing.

• Example 3: Non-Resident Alien Student with Taxable Scholarship

  Ahmed is an international student from Egypt studying at a university in California on an F-1 visa. He receives a scholarship that covers his tuition, fees, and a stipend for living expenses. While some parts of his scholarship might be tax-exempt, the stipend portion for living expenses is considered taxable income in the U.S. Since Ahmed is a non-resident alien for tax purposes and does not have an SSN, he would need an ITIN to report his taxable scholarship income and file his annual U.S. federal income tax return.