What is ITIN?
First of all, we need to understand what ITIN is. There are many explanations online, but it's better to go directly to the official website of the US Internal Revenue Service (IRS) to learn more, as the IRS is the most authoritative source.
However, many fans have concerns before applying for an ITIN.
For example, after obtaining a US tax number, do we need to pay taxes to the US every year?
Will ITIN have any impact if I plan to immigrate or move to the US in the future?
Some friends also ask, if I am currently trading US stocks, will the tax rate for trading US stocks change after obtaining a US tax number?
Because everyone knows that if we use our domestic identity to trade US stocks, we don't need to pay capital gains tax, only interest tax and dividend tax. But if we are US tax residents, we still need to pay capital gains tax, which is about 30%, which is quite a lot. So many friends are concerned about this issue, whether having a US tax number will result in paying more taxes.
What is the purpose of ITIN?
We can see this sentence on the IRS official website: "ITINs are for federal tax reporting only." In other words, ITIN has only one purpose, which is for federal tax reporting, or in other words, for filing taxes.
Some friends may find it strange that if the IRS says ITIN cannot be used for purposes other than tax reporting, why can you use ITIN to apply for a US bank account?
Actually, this is an interesting question. The official purpose of ITIN is only for tax reporting, but many banks in the US voluntarily accept ITIN as a form of identification to expand their customer base, such as for new immigrants, people without jobs, or students studying in the US who do not have a Social Security Number (SSN). This is solely the bank's decision and is unrelated to the IRS.
ITIN expiration date
ITIN is valid for 5 years, which means ITIN issued in 2014 will expire on December 31, 2019. ITIN that has not been used for three consecutive years will also expire. For example, if you applied for ITIN in 2016 but did not file taxes in 2017, 2018, and 2019, your ITIN will expire on December 31, 2019. Expired ITIN can be renewed without submitting tax returns, but you must provide a valid reason for needing ITIN.
Methods of applying for ITIN
Since ITIN is mainly used for tax reporting, many people think it can only be applied for when filing taxes, but that's not true. In certain special circumstances, applicants can apply for ITIN separately without submitting tax returns, so you can apply for ITIN anytime, not just when filing taxes. Below are the methods of applying for ITIN based on whether or not to submit Form 1042-S:
- Publish an e-book on Amazon and request an ITIN Letter from Amazon to prove your need for tax reporting. Make sure to request a physical copy as the success rate for electronic versions is low. The reason for tax reporting is reasonable: applying for ITIN to enjoy tax benefits in the US and other countries. Alternatively, you can apply through Form 1042-S (if earning money through a broker).
If you decide to apply for ITIN yourself, it's best to get a passport certification first, as there is a risk of losing the original passport when mailing it. If you have a regular passport, it's not a big deal if it gets lost, but if your passport has a US visa, Canadian visa, or other difficult-to-obtain visas, it's more reliable to apply for a passport certification. Applying for a passport certification is not difficult. Bring your passport, a copy of the passport's first page, $50 in cash or a credit card, and go to the US consulate in China to apply for a passport certification. You must make an appointment online before going. The address is: [US Citizen Services | Citizen Office Appointment System]. Yes, Chinese citizens can also go to the US consulate with their Chinese passports for notarization. They will stamp and sign on the copy of the passport.
Form filling: Form W-7, Form 1040-NR. There are detailed instructions available online on how to fill out the forms. You can use Google to search for relevant keywords like "how to fill out 1040nr" or "how to fill out w7," or refer to the official IRS website: Application for IRS Individual Taxpayer Identification Number and U.S. Nonresident Alien Income Tax Return.
Mailing:
The materials that need to be mailed are:
W-7 form
1040-NR form
1042-S (if applicable)
Passport certification
If you are using the method of publishing an e-book on Amazon to obtain an ITIN Letter, you only need to mail the following materials:
W-7 form
ITIN Letter
Passport certification
Cover letter explaining your situation: applying for ITIN to enjoy tax benefits in the US and other countries, to facilitate the processing of your ITIN application.
Mailing address:
Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342
Checking application status: The phone number is 1-800-908-9982.
If you are not fluent in English, you can use another phone to use ChatGPT voice recognition or translation software to convert speech into text. The effect is very good.
The second method is relatively simple:
Contact an IRS-approved accountant to apply for ITIN. You need to provide the following documents:
- Scanned copy of your passport
- Completed ITIN application form
- Processing fee within CNY 3000
- Processing time is two to three months
My suggestion is to find a CAA agent on JD, Taobao, or Fiverr to apply.
If you trust me, you can also contact me for assistance.
Pros and cons of the two application methods
Applying by yourself:
One method circulating online is to publish an e-book on Amazon in the US. After earning income, Amazon will send you a tax form. After receiving the tax form in your home country, you can mail the required documents to the IRS for application. The specific operation methods can be found through a Google search.
The advantage is that it is completely free.
However, it requires a lot of time and effort. Also, since Amazon's tax forms are sent by regular mail, there is a higher risk of loss.
The success rate is relatively low.
Applying through an accountant:
The second method is simple, which is to find a reliable US-certified acceptance agent, usually an accountant.
The advantage is that it can be successfully applied through remote video witnessing without mailing the original passport. Scanned copies or photos are sufficient.
The disadvantage is that the cost is higher.
Will ITIN affect our tax status?
ITIN is not affected by immigration status. Both tax residents and non-tax residents are eligible to apply for ITIN.
Having an ITIN does not mean we can work in the US. For example, if someone with a tourist visa wants to work in the US and wonders if they can apply for a job with a US tax number, the answer is no.
We also cannot enjoy US social benefits. Only those with a Social Security Number (SSN) are eligible for US social benefits.
We also cannot claim certain tax exemptions for earned income.
The IRS website clearly states that ITIN is only for federal tax reporting purposes, and it can be applied for regardless of immigration status. Therefore, we can deduce that ITIN does not affect our tax status or the tax rates we need to pay in the US.
Do we have to pay taxes after obtaining ITIN?
The answer is that we don't necessarily have to pay taxes, but we must file taxes.
Paying taxes and filing taxes are two different concepts. Whether or not we need to pay taxes, we still need to file taxes. For example, my main US assets are the cash balance in my bank checking account and stocks with a US brokerage. In principle, we need to have an accountant file taxes for these US assets every year, but the bank account in the US does not generate interest, which means it does not generate income, so we can file a zero tax return for that. Dividends from US stocks, on the other hand, are taxable, but the brokerage will withhold taxes each time, so we don't owe taxes to the IRS and don't need to file a tax return.
The conclusion is that as long as we don't owe taxes or engage in tax evasion, as non-US tax residents, we can choose not to file taxes.
However, if we have a significant amount of personal assets and plan to move to the US in the future, it's a good idea to find a US accountant and file a zero tax return.
Another situation is when we have been over-taxed and need to apply for a tax refund, in which case it is necessary to file taxes.
Now let's take a look at this important reminder: expired ITIN. This paragraph means that if our ITIN has not been used for tax reporting in the past three years, it will expire. In other words, if we want to keep our ITIN valid, we must file a tax return within three years.
How to file US taxes?
We can find a US accountant and provide our monthly bank statements and brokerage monthly statements or Form 1042-S from the brokerage, and authorize the accountant to file taxes on our behalf. After filing, our ITIN will be valid for another three years.
We can also use free tax filing software to file taxes. It doesn't have to be a zero tax return.