INTERNAL REVENUE SERVICE: FOREIGN TIN DOCUMENTATION

I.         INTRODUCTION

IRS regulations establish procedures for requesting a Taxpayer Identification Number (TIN) for certain foreign or alien individuals for whom a Social Security Number (SSN) is not available.  The numbers issued to foreign or alien taxpayers are referred to as “IRS individual taxpayer identification numbers” or “ITINs”.  An “alien individual” is an individual who is not a citizen or native of the United States.  Implementing regulations were effective May 29, 1996, and the IRS began accepting applications for ITINs on Form W-7 on July 1, 1996.  Effective December 17, 2003, applicants must use a revised Form W-7 and provide proof that the ITIN is used for tax administration purposes and not for other reasons, such as providing personal identification.

II.        ITIN PROCEDURES

IRS regulations generally require a U.S. citizen to provide a TIN for securing proper identification on any return, statement or other document made under the Internal Revenue Code.  The ITIN is used by alien individuals who currently do not have, and are not eligible to obtain, SSNs.  Any foreign person who files a tax return must furnish their ITIN on that return (former rules excluded foreign persons from the general requirement of providing TINs when they neither had (1) income effectively connected with the conduct of a U.S. trade or business; or (2) a U.S. office or place of business or a U.S. fiscal or paying agent).

Examples of individuals who need an ITIN under the regulation are as follows:

  1. Nonresident alien individuals not eligible for an SSN who are required to file a U.S. tax return or who are filing a U.S. tax return only to claim a refund;
  2. Nonresident alien individuals not eligible for an SSN who elect to file a joint U.S. tax return with a spouse who is a U.S. citizen or resident;
  3. U.S. resident aliens who file U.S. tax returns and who are not eligible for an SSN;
  4. Alien individuals claimed as dependents on U.S. tax returns and who are unable or not eligible to obtain an SSN; and
  5. Alien individuals claimed as spouses for exemptions on U.S. tax returns and who are not eligible to obtain an SSN.

Alien individuals who are not eligible to obtain an SSN and who are required to furnish a TIN may apply for an ITIN on revised Form W-7, Application for IRS Individual Taxpayer Identification Number or such other form as the IRS may prescribe.  ITIN applicants must show a federal tax purpose for seeking the ITIN.  If seeking an ITIN to meet income tax filing obligations, the applicant must attach a federal tax return to Form W-7 when ready to file a tax return with the IRS.  Applicants must also submit sufficient documentary evidence in order to establish alien status and identity (There are 13 acceptable documents listed in the Form W-7 instructions).  Examples of acceptable documentary evidence are:  original (or a certified copy of an original) passport; driver’s license, birth certificate; identity card or immigration documentation.  The appearance of an ITIN is an “authorization letter” as opposed to a card that would make it similar to a Social Security Number Card.

III.       ACCEPTANCE AGENTS

Financial institutions may serve as “acceptance agents” to provide applications for ITINs.  To qualify as an acceptance agent, a financial institution must establish, to the satisfaction of the IRS, that it has adequate resources and procedures in place to comply with the terms of an agreement that it must enter into with the IRS.  A financial institution wishing to become an acceptance agent must sign an agreement that may contain the following:

  1. Procedures for providing Form SS-4 (Application for an EIN) and revised Form W-7, or such other necessary form to applicants for obtaining a TIN and for providing the application form together with a certification that the acceptance agent has reviewed the required documentation and that it has no actual knowledge or reason to know that the documentation is not complete or accurate;
  2. Procedures for providing assistance to applicants in completing the application form or completing it for them;
  3. Procedures for collecting, reviewing, and maintaining, in the normal course of business, a record of the required documentation for assignment of a TIN;
  4. Procedures for submitting the application form and required documentation to the IRS, or if permitted under the agreement, submitting the application form together with a certification that the acceptance agent has reviewed the required documentation and that it has no actual knowledge or reason to know that the documentation is not complete or accurate;
  5. Procedures for assisting taxpayers with notification procedures in the event of a change of foreign status;
  6. Procedures for making all documentation or other records furnished by persons applying for a TIN promptly available for review by the IRS, upon request; and
  7. Provisions that the agreement may be terminated in the event of a material failure to comply with the agreement, including failure to exercise due diligence under the agreement.

IV.       CONCLUSION

The effect of the ITIN on banks should be minimal, unless the bank enters into an agreement with the IRS to act as an acceptance agent for taxpayers making application for an ITIN.  Banks should continue to obtain a completed and signed W-8, Certificate of Foreign Status, prior to opening an account.

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