Individual Tax Identification Number (ITIN)

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Individual Tax Identification Number (ITIN)

• Prepared for
• The 4th Latino Credit Union Conference Compliance
  Workshop

Francine Prince-Jones ITIN Program Manager
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Agenda

• Individual Taxpayer Identification Numbers (ITIN)
• Exceptions
• Acceptance Agent Program

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What is an ITIN?

• An ITIN is a unique 9 digit tax processing number
  beginning with 9 with the middle two digits
  ranging from 70 to 80.
• The ITIN is issued to individuals required to pay
  tax or who have a tax reporting requirement to
  the IRS but do not qualify for a Social Security
  Number.

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An ITIN does NOT.

• Entitle the recipient to Social Security benefits
  or Earned Income Tax Credit (EITC) but maybe
  eligible for CTC and ACTC
• Create an inference regarding the individuals
  immigration status
• Give the individual the right to work in the U.S.

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An ITIN is required if you are ..

• A nonresident alien filing a U.S. tax return and
  not eligible for a SSN (Reason b on W-7)
• A U.S. resident (based on the days present in the
  United States) filing a U.S. tax return and not
  eligible for a SSN (Reason c on W-7)

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Requirements Cont.

• A dependent of U.S. citizen/resident alien
  (Reason d on W-7)
• A nonresident spouse being shown on a tax return
  as an exemption (Reason e on W-7)
• resident spouse, too.

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EXCEPTIONS

• Exception 1 Passive Income -treaty benefits or
  third party withholding (banks, financial
  institutions, partnerships, annuities, royalty
  income, etc.)
• Exception 2 Other Income (wages, salary,
  compensation) treaty benefits, foreign students
  on scholarship
• Exception 3 Third party Withholding Mortgage
  interest
• Exception 4 Disposition by foreign person of
  U.S. Real Property Interest- withholding
  obligations

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Exception 1- Third Party Withholding on Passive
Income
Federal Tax Withholding and/or Information
Reporting must take place within the current tax
year.

• 1(b) Individuals who have opened an interest
  bearing bank deposit account that generates
  income which is effectively connected with their
  U.S. trade or business and is subject to IRS
  information reporting and/o federal tax
  withholding or

• Documentation
• Submit documentation from the bank that an
  interest bearing business account was opened that
  is subject to IRS information reporting and/or
  federal tax withholding during the current tax
  year.

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Exception 1 Cont.

• Documentation
• 1(c) Submit documentation from the bank stating
  that you are receiving distributions from a
  deposit account which are subject to IRS
  information reporting and/or withholding of
  federal income (or would be except for the dollar
  threshold amount) during the current tax year..
  An acknowledged (signed or stamped by the Bank)
  copy of the Form W-9 that you provided to the
  Bank must be attached to Form W-7/ W-7SP.

• 1(c) Individuals who are resident aliens for
  tax purposes and have opened up an interest
  bearing bank deposit account that generates
  income subject to IRS information reporting
  and/or withholding of federal income tax (or
  would be except for the dollar threshold amount)
  or

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Exception 1 Cont.

• 1(d) Individuals who are receiving distributions
  during the current year of income such as
  pensions, annuities, royalties, dividends, etc,
  and are required to provide an ITIN to the
  withholding agent (i.e. investment company,
  insurance company, financial institution, etc.)
  for the purposes of tax withholding and
  reporting

• Documentation
• Submit documentation in the form of a signed
  letter or document from the withholding agent, on
  official letterhead, showing the individuals
  name and account number, and evidencing that an
  ITIN is required to make distributions to the
  individual during the current tax year, which are
  subject to federal tax withholding and/or
  reporting requirements

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Exception 3 - Third Party Reporting of Mortgage
Interest

• Information reporting and
• withholding requirements
• apply to third parties
• frequently banks and
• other financial institutions)
• who will request an ITIN
• to enable them to file
• information reports that
• are required by law.
• Form 1098, Mortgage Interest Statement.

• Documentation
• Individuals who show evidence of a home mortgage
  loan. This
• would include a copy of the contract of sale or
  similar documentation, showing evidence of a home
  mortgage loan on real property located in the
  United States.

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Exception 4 - Third Party Withholding Disposition
by Foreign Person of US Real Property

• Information reporting and
• Withholding requirements apply
• to third parties frequently banks
• and other financial institutions
• who will request an ITIN to
• enable them to file information
• reports that are required by law.
• Form 8288 - U.S. Withholding Tax Return for
  Dispositions by Foreign Persons of U.S. Real
  Property Interests,
• Form 8288-A Statement of Withholding on
  Dispositions by Foreign Persons of U.S. Real
  Property Interests.
• Form 8288B - Application for With holding
  Certificate for Dispositions by Foreign Persons
  of U.S. Real Property Interests.

• Documentation
• Generally imposed on a buyer or other transferee
  (withholding agent) when a U. S. real property
  interest is acquired from a foreign person.
• A completed Form 8288-B and a copy of the
  contract of the sale.
• For the seller of the property, Forms 8288 and
  8288A submitted by the buyer should be attached
  to the Form W-7/W-7SP.

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How to Apply for an ITIN

• To apply for an ITIN requires a completed Form
  W-7 and
• Attach a valid original return or documentation
  substantiating the exception to the return
  requirement
• Attach an original or certified copies of
  identification documents

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W-7 Application Process

• Mailing the Form W-7 and the required attachments
  to Philadelphia Service Center, Bensalem, PA.
• Visit a Taxpayer Assistance Centers (TACs) where
  IRS employees will assist with the preparation of
  the Form and review the documentation.
• Seek assistance of an Acceptance Agent authorized
  by the IRS to assist with completion of the Form
  W-7 and certify the documentation.

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Acceptance Agent Program

• Acceptance Agents are critical to the success of
  the ITIN program primarily because of their
  closer proximity and availability to those
  needing ITINs for tax purposes.
• AAs can include educational institutions,
  financial institutions, government
  entities/military installations, volunteer
  organizations and tax practitioners.

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Acceptance Agents Cont.

• Revenue Procedure 2006-10
• Acceptance Agent Agreements expire December 31,
  2006.
• New Agreements will expire 4 years from the date
  signed.
• FBI Investigations (fingerprinting)
• Tax Compliance checks. Application Form 13551 is
  required to apply for the AA Program.

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Acceptance Agent Program Cont.

• Form 13551 Application to Participate in the
  Acceptance Agents Program
• Mail applications to address in the instructions
  (Andover, MA)
• Takes approximately 90 days to process an
  applications.

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Help and Information

• Internal Revenue Service
• ITIN Program Office
• 401 W. Peachtree St., NW
• Mail Stop 97WI
• Atlanta, GA 30308
• www.irs.gov
• ITINProgramOffice_at_irs.gov
• Telephone No. [phone]

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