Understanding ITIN: Your Essential Guide to Tax IDs

Picture this: You’ve just closed your first major deal with a US client. Revenue is flowing in from American customers, and your company is ready to take the next step—establishing a real presence in the United States. Then you hit a wall. You discover that navigating the US tax system requires something you’ve never heard of: an Individual Taxpayer Identification Number, or ITIN.

Welcome to one of the most misunderstood aspects of US business expansion. The ITIN sits at the intersection of tax compliance and business operations, and getting it wrong can derail your American ambitions before they even begin.

For international business owners and executives expanding to the US, understanding ITINs isn’t just about checking a compliance box. It’s about unlocking the ability to operate legally, file taxes properly, and build the financial foundation your American business needs to thrive.

What Exactly Is an ITIN?

An Individual Taxpayer Identification Number is a nine-digit tax processing number issued by the Internal Revenue Service (IRS). It follows the same format as a Social Security Number—nine digits arranged as XXX-XX-XXXX—but always begins with the number 9 and has specific ranges (50-65, 70-88, 90-92, or 94-99) for the fourth and fifth digits.

Here’s what makes ITINs critical for international business owners: they allow individuals who don’t have and aren’t eligible for a Social Security Number (SSN) to fulfill their US federal tax obligations. This includes foreign nationals living abroad, nonresident aliens with US-source income, and dependents or spouses of US taxpayers.

“The ITIN is specifically designed for tax purposes,” explains Joanne Farquharson, President & CEO of Foothold America. “Many international executives assume they can handle US taxes the same way they do back home, but the American system has unique requirements. The ITIN is your entry point into compliance.”

What an ITIN Can and Cannot Do

Understanding the scope and limitations of an ITIN is crucial for international business owners. Let’s be clear about what an ITIN enables you to do—and what it definitely does not.

What an ITIN Allows You To Do

An ITIN serves a specific purpose within the US tax system. It allows you to file individual federal tax returns when you personally have US-source income that requires reporting. This includes your personal share of income from US investments, rental properties you own individually, or your portion of income from pass-through business entities like partnerships and LLCs.

The number enables you to claim certain tax benefits and credits available to you as a foreign person with personal US-source income. It also allows you to comply with tax treaty provisions between your home country and the United States, potentially reducing your overall personal tax burden through treaty-negotiated rates.

For business owners, an ITIN permits you to report your personal share of income from pass-through entities like partnerships and Limited Liability Companies (LLCs) where you’re a member. This is particularly important because many international entrepreneurs structure their US operations as LLCs, and your personal share of income from these entities must be reported on your individual tax return.

What an ITIN Does Not Allow

Here’s where many international business owners get confused. An ITIN is strictly a personal tax identification number. It does not authorize you to work in the United States. You cannot use it to obtain work authorization or apply for immigration benefits.

An ITIN does not make you eligible for Social Security benefits. It’s not valid identification for purposes outside the federal tax system. You cannot use it as a substitute for a Social Security Number when a Social Security Number is specifically required.

The ITIN also doesn’t qualify you for the Earned Income Tax Credit (EITC), even if you file tax returns and report earned income. This credit is specifically reserved for Social Security Number holders.

Perhaps most importantly for business banking, an ITIN typically isn’t the primary requirement for opening a US business bank account. Most banks require an Employer Identification Number (EIN) for business entities, along with other corporate documentation.

Who Needs an ITIN?

The ITIN requirement applies to several categories of individuals in the international business community. If you fall into any of these groups, you likely need to obtain an ITIN to remain compliant with US tax laws.

Foreign Business Owners with Personal US-Source Income

You’re running a successful business in London, Berlin, or Melbourne. Your company is selling products or services to American customers, and if you personally receive US-source income through ownership in a pass-through entity, that income needs to be reported to the IRS on your individual tax return. Even if you never set foot in the United States, if you personally have US-source income, you likely have a filing obligation that requires an ITIN.

This applies when you’re earning personal income from pass-through entities with US operations, US investments held in your own name, or rental properties owned in your personal capacity.

Partners in US Businesses

If you’re a foreign national who owns a stake in a US partnership or multi-member LLC, you need an ITIN to report your personal share of the business income. These pass-through entities don’t pay federal income tax themselves. Instead, the income “passes through” to the partners or members, who report it on their personal tax returns.

The partnership or LLC will issue you a Schedule K-1 showing your share of the income, deductions, and credits. You need an ITIN to properly file this information with the IRS on your individual tax return.

Real Estate Investors

Foreign investors purchasing US real estate in their personal capacity face complex tax obligations. If you’re buying rental properties in America, you must report the rental income to the IRS on your personal return. When you sell US real property, the Foreign Investment in Real Property Tax Act (FIRPTA) requires withholding of tax, and you’ll need an ITIN to claim any refund you’re entitled to.

Dependents and Spouses

If you’re a foreign national who is the spouse or dependent of a US taxpayer, you may need an ITIN if your spouse is claiming certain tax benefits related to you. This includes the standard deduction for married filing jointly or credits for qualifying dependents.

The Critical Difference: ITIN vs EIN vs SSN

International business owners often confuse these three tax identification numbers. Understanding the difference is essential for proper compliance and business structure.

Social Security Number (SSN)

Social Security Numbers are issued by the Social Security Administration to US citizens, permanent residents, and certain temporary workers authorized to work in America. An SSN serves multiple purposes beyond taxation—it’s used for Social Security benefits tracking, employment verification, and various government services.

For business purposes, US citizens and permanent residents use their SSN when operating sole proprietorships or single-member LLCs. However, as a foreign national without US work authorization, you cannot obtain an SSN.

Employer Identification Number (EIN)

An EIN is a federal tax identification number for businesses. Think of it as a Social Security Number for your company. Every corporation, partnership, multi-member LLC, and any business with employees needs an EIN.

Here’s the critical point for international business owners: you can obtain an EIN for your US business entity without having an SSN or ITIN. The EIN belongs to the business entity, not to you personally. However, depending on your business structure and whether you receive personal income from that business, you may need an ITIN for your personal tax filing obligations.

Individual Taxpayer Identification Number (ITIN)

The ITIN is specifically for individuals who have US personal tax filing obligations but cannot obtain an SSN. It’s your personal tax identification number, separate from any business entity numbers.

“International companies often have the EIN for their US entity, and depending on the ownership structure, individual owners who receive pass-through income may need ITINs for their personal tax returns,” notes Laurie Spicer, Director of US Expansion at Foothold America. “The business files under its EIN, and when applicable, owners must file personal returns using their ITINs to report their share of income.”

How to Apply for an ITIN: The Complete Process

Applying for an ITIN requires careful attention to detail and proper documentation. The IRS has strict requirements, and mistakes can delay your application by months. Here’s exactly what you need to do.

Step One: Complete Form W-7

The application process begins with Form W-7, Application for IRS Individual Taxpayer Identification Number. This form collects basic biographical information including your name, mailing address, foreign address, birth information, and country of citizenship.

You must indicate the reason you’re applying for an ITIN. For international business owners, this typically falls under reasons related to filing a US tax return. The form requires you to check the specific reason, such as “Nonresident alien required to file a US tax return” or “US resident alien filing a US tax return.”

Step Two: Prepare Your Individual Tax Return

Here’s a critical point that applies to most ITIN applicants: The IRS generally requires you to attach a federal tax return to your Form W-7 unless you qualify for one of the limited exceptions. This means the ITIN application process is typically tied to your tax filing.

You would complete either Form 1040 (for residents) or Form 1040-NR (for nonresidents), leaving the space for your taxpayer identification number blank. The IRS will assign your ITIN and enter it on your return when they process your application.

“The tax return requirement means the ITIN application process is usually coordinated with tax filing,” explains Geanice Barganier, Vice President of People Operations at Foothold America. “You need to have your income documentation ready—such as Schedule K-1s from partnerships or LLCs—to complete your return and submit it with your ITIN application.”

Step Three: Gather Supporting Documents

The IRS requires original documents or certified copies from the issuing agency to prove your identity and foreign status. This is non-negotiable and represents one of the biggest challenges for international applicants.

A valid passport is the gold standard document. If you submit your passport, it establishes both your identity and foreign status, and you don’t need to provide any other documents. The passport must show your photograph, name, and date of birth.

If you cannot submit a passport or choose not to, you must provide at least two other documents from the IRS-approved list. At least one of these documents must contain your photograph. Acceptable documents include national identification cards, US driver’s licenses, civil birth certificates, medical records, and school records.

The documents must be original or certified copies. The IRS will not accept notarized copies or photocopies. A certified copy is one that the original issuing agency provides, with an official seal or stamp indicating it’s an exact copy of the original.

Step Four: Submit Your Application

You have three options for submitting your ITIN application, and choosing the right method depends on your circumstances and location.

Mail Your Application

You can mail your completed Form W-7, supporting documents, and tax return to the IRS address listed in the Form W-7 instructions. This method requires you to send original documents or certified copies, which will be returned to you within 60 days.

The obvious risk here: you’re mailing your passport or other vital documents internationally. While the IRS has procedures for handling these documents, the potential for loss during international mail creates understandable anxiety for applicants.

Visit an IRS Taxpayer Assistance Center

If you’re in the United States, you can make an appointment at an IRS Taxpayer Assistance Center that offers ITIN services. An IRS agent will review your original documents and return them to you immediately after making certified copies.

This option provides peace of mind because you’re dealing directly with the IRS, and you don’t have to mail your original documents. However, it requires you to be physically present in the US, which isn’t always practical for international business owners.

Work with a Certifying Acceptance Agent (CAA)

Certifying Acceptance Agents are individuals or entities authorized by the IRS to assist with ITIN applications. CAAs can review your documents, certify them as authentic, and submit your application to the IRS on your behalf.

The major advantage: CAAs can verify your documents in person and send certified copies to the IRS, so you don’t have to mail your original passport. Many CAAs operate internationally, making this option particularly valuable for business owners who cannot easily travel to the United States.

Professional services like accounting firms, tax preparation companies, and tax attorneys often include CAA services. Foothold America can make referrals to qualified professionals who can assist with your ITIN application. Some charge fees for this service, but the convenience and document security often justify the cost.

Timeline and Processing

Understanding the ITIN application timeline is crucial for planning your tax compliance. The IRS provides general guidance, but actual processing times can vary significantly.

Standard Processing Time

The IRS states that ITIN applications typically take seven to eleven weeks to process during normal periods. However, during peak tax season (January through April), processing times often extend to nine to eleven weeks or longer.

This extended timeline requires planning. You cannot file personal tax returns reporting US-source income without an ITIN. The application process takes months, and since you typically need to submit a tax return with your application, timing becomes important.

“The key is understanding that the ITIN application and your tax return usually go together,” notes Joanne Farquharson. “Once you have your income documentation ready—which is typically after the end of the tax year—you can prepare your return and submit it with your ITIN application. If you need more time to file, you can request an extension using Form 4868, though any tax owed is still due by the original deadline.”

What Happens During Processing

After the IRS receives your application, they review your Form W-7 for completeness and accuracy. They verify that your supporting documents meet their requirements and establish your identity and foreign status. They assign your ITIN, enter it on your tax return, and forward the return for processing.

The IRS will send you a letter—called a CP 565 Notice—with your ITIN. This typically arrives by mail at the address you provided on Form W-7. Keep this letter in a safe place. You’ll need your ITIN for all future tax filings and correspondence with the IRS.

Your original documents (or certified copies if you used a CAA) will be returned separately, typically within 60 days. If you haven’t received your documents back within 60 days, you should contact the IRS to inquire about their status.

Common Application Delays and Rejections

Several issues commonly cause ITIN applications to be delayed or rejected. Understanding these problems helps you avoid them.

Incomplete or incorrectly filled Form W-7 tops the list. Missing information, conflicting data, or checking the wrong boxes can result in rejection. The IRS will send you a CP 567 Notice explaining that your application was rejected and you must resubmit it.

Insufficient or improper supporting documents cause many rejections. Documents that don’t meet IRS specifications, expired documents, or documents that don’t clearly establish your identity and foreign status will result in denial.

Failing to include a tax return with your application (unless you qualify for an exception) guarantees rejection. The IRS won’t process ITIN applications without an attached return showing a genuine tax filing requirement.

Errors on the tax return itself can also cause problems. If your return has significant mistakes or inconsistencies, the IRS may set your entire application aside for additional review.

ITIN Renewal and Expiration

ITINs don’t last forever. Understanding the renewal requirements prevents compliance gaps that could affect your tax obligations.

When ITINs Expire

The IRS implemented expiration rules to maintain the accuracy and integrity of the ITIN database. Your ITIN will expire if you don’t use it on a federal tax return for three consecutive years. Additionally, ITINs issued before 2013 have been expiring on a rolling schedule based on the middle digits of the number.

If your ITIN has expired or is about to expire, and you have a US tax filing requirement, you must renew it. An expired ITIN cannot be used to file tax returns. If you submit a return with an expired ITIN, the IRS will process the return but won’t apply certain tax benefits until you renew the number.

How to Renew Your ITIN

The renewal process mirrors the original application. You complete Form W-7 and mark the box indicating you’re renewing an existing ITIN. You must submit the same supporting documents proving your identity and foreign status.

The key difference: you don’t necessarily need to attach a tax return when renewing if your ITIN expired solely due to non-use and you’re not filing a return for the current year. However, if you are filing a return, you must include it with your renewal application.

“ITIN expiration can catch business owners by surprise,” warns Laurie Spicer. “If your business structure changes or you don’t have US-source income for a few years, your ITIN may expire. When income flows through again, you’ll need to renew before filing. Monitor your ITIN status if you expect future US-source income.”

Tax Compliance for ITIN Holders

Having an ITIN creates personal tax obligations that international business owners must understand and fulfill. These obligations continue year after year as long as you personally have US-source income.

Annual Tax Filing Requirements

If you personally have US-source income that requires reporting, you must file an annual individual tax return. For nonresident aliens, this typically means filing Form 1040-NR, which reports only income from US sources and has different rules than the standard Form 1040.

The filing deadline for most taxpayers is April 15 of the year following the tax year. For example, your 2024 tax return is due April 15, 2025. If that date falls on a weekend or legal holiday, the deadline moves to the next business day.

Different rules apply depending on your residency status and the type of personal income you’re earning. The IRS provides substantial guidance on these rules, but their complexity makes professional tax assistance highly valuable for most international business owners.

State Tax Considerations

Federal taxes are just the beginning. Depending on your specific situation, you may also have state tax considerations for your personal income.

The rules around state taxation for individuals vary significantly by state and depend on factors like where you perform services, the nature of your income, and your residency status. Each state has its own rules about what creates taxable nexus and filing requirements for individuals.

“State tax considerations for individuals with US-source income can be complex,” explains Geanice Barganier. “The requirements depend heavily on your specific situation. This is why working with tax professionals who understand international taxation is essential—they can help you understand both federal and any applicable state obligations.”

At Foothold America, we help international companies navigate these complexities. While we don’t prepare tax returns ourselves, we work with vetted tax professionals who specialize in international taxation and can guide you through federal and state requirements. Learn more about how we support international companies expanding to the US.

Estimated Tax Payments

If you’re earning significant personal US-source income and not having taxes withheld, you may need to make quarterly estimated tax payments. The IRS expects you to pay tax as you earn income, not just when you file your annual return.

“Many international business owners don’t realize they need to make estimated payments throughout the year,” notes Liz Gamarra, Accountant at Foothold America. “They wait until tax season and discover they owe a large amount, plus potential penalties for underpayment. If you’re receiving pass-through income from a US partnership or LLC, or earning rental income from US properties, estimated quarterly payments help you stay compliant and avoid surprises.”

You can make estimated tax payments even before receiving your ITIN. Use Form 1040-ES (NR) for nonresident aliens, writing “ITIN TO BE REQUESTED” in the spaces for your tax identification number.

ITINs and Business Banking

International business owners often ask about ITIN requirements for banking. The answer depends on the type of account and the specific bank’s policies.

Personal Banking with an ITIN

Some US banks will allow you to open a personal bank account using your ITIN instead of a Social Security Number. However, not all banks accept ITINs, and those that do often have specific requirements and limitations.

Opening a personal account with just an ITIN typically requires additional documentation proving your identity and address. You may need to visit a branch in person, as remote account opening with an ITIN is often more difficult.

Business Banking Requirements

For business accounts, banks require an EIN for the business entity. They’re providing services to the business, not to you personally, so they need the business’s tax identification number.

As a business owner, you’ll also need to provide personal identification. Requirements vary by bank and should be confirmed directly with your banking partners. You’ll also need your business formation documents, an EIN confirmation letter, and other documentation depending on the bank’s policies.

“Banking represents one of the practical challenges international companies face,” notes Joanne Farquharson. “You need a US bank account to operate effectively, but obtaining one requires proper documentation for both the business entity and the principals. This is one area where having experienced support makes a difference. We help our clients navigate these banking relationships as part of our comprehensive US expansion services.”

ITINs and Your US Expansion Strategy

For international business owners who will receive personal US-source income, understanding ITIN requirements is an important part of tax planning.

When to Consider ITIN Requirements

If you’re personally receiving US-source income through a pass-through entity that requires reporting on an individual tax return, you’ll need to plan for obtaining an ITIN.

If you’re planning to invest in US real estate in your personal capacity, consider the ITIN requirements before completing the purchase. This ensures you can properly report rental income and handle withholding requirements when you eventually sell.

If you’re forming a partnership or LLC with US operations where income will pass through to you personally, factor ITIN requirements into your tax compliance planning.

Integrating ITIN Considerations into Your Expansion Plan

When you’re planning your US market entry, consider the personal tax implications for owners and executives who will receive personal US-source income.

Understand that the ITIN application process takes seven to eleven weeks and is typically coordinated with tax filing. Factor in the document requirements and decide whether you’ll handle applications yourself or work with a CAA.

If you’re hiring employees in the US through an Employer of Record service like Foothold America, we can help you understand when and how ITIN requirements may apply to your specific situation.

How Foothold America Supports Your US Tax Compliance

At Foothold America, we understand that international business owners face a steep learning curve when it comes to US tax compliance. ITINs are one piece of a complex puzzle that includes entity formation, payroll compliance, employment law, and ongoing reporting obligations.

While we don’t provide tax preparation services or legal advice, we work closely with a network of qualified tax professionals and attorneys who specialize in international taxation. We can connect you with the right advisors for your specific situation, whether you need help with ITIN applications, annual tax compliance, or strategic tax planning.

Our comprehensive services for international companies are designed to handle the operational complexities of US expansion, including:

• Employer of Record services that allow you to hire US employees without establishing your own entity
• PEO+ Cross-Border Support for companies with their own US entities who need comprehensive HR support
• US entity setup services that ensure proper formation and compliance from day one
• Ongoing support that adapts as your business grows and your needs evolve

The Bottom Line: ITINs and Your American Success

The Individual Taxpayer Identification Number is an important tool for personal tax compliance when international business owners have US-source income. Understanding when ITINs are needed and how to obtain them properly helps ensure smooth tax compliance.

Success in US expansion comes from understanding compliance fundamentals. ITINs are one of those fundamentals when personal US-source income is involved. Getting the process right from the beginning helps avoid complications and builds a solid foundation for your US operations.

The good news: with proper planning and the right support, obtaining and managing an ITIN when needed doesn’t have to be complicated. Understand the requirements, work with qualified professionals, and integrate ITIN compliance into your broader tax planning strategy.

Ready to take the next step in your US expansion journey? Contact Foothold America today to learn how our team of US expansion specialists can help you navigate tax compliance and every other aspect of building your American presence.