ITIN Guide, unlock US banking and credit
The US banking sector offers some of the best credit products in the world, and for non-US residents, the ITIN represents an easy way in with very few downsides. In this guide, I explain how to apply for one.
Simon @ FS / Chicago, Illinois
US ITIN, why and the implications
A US ITIN is a tax ID, issued by the IRS, to non-residents who need to file US returns, have other qualifying filing or withholding tax liabilities and to residents who are not eligible for a SSN. The format is the same as for SSNs, except that ITINs always begin with a 9. This similarity allows ITINs to be used in lieu of SSNs, in most circumstances, including when passing credit checks and fulfilling KYC requirements.
US banks typically rely on credit checks to identify applicants, as part of their KYC procedures, because someone with a US credit history already has US banking products, meaning they have already been identified by another US bank (the piggyback system). There is also an assumption that the federal government has IDed the SSN / ITIN holder.
As a result, someone with an SSN / ITIN and US credit history can often open bank accounts without having to present any ID, proof of residence or other supporting documents.
While being able to open bank accounts remotely, and without having to provide supporting documents (or with only a proof of address), is a great benefit in and of itself, being able to apply for US credit cards is an even greater benefit. That is because US credit cards offer significantly better benefits than credit cards anywhere else in the world, especially to those who are frequent travelers.
Having an ITIN can also open access to a significant number of US payment processing services, for those with an LLC.
As for the implications, besides the hassle of applying for the ITIN and keeping it active, there are none that I can think of. Having an ITIN will not create a US filing liability and / or tax liability.
Application method one: 1040NR
This method is by far the easiest, and most reliable, way for a non-US resident to apply for an ITIN. Essentially, the idea is to “create” US ECI (taxable income), report said income via a non-resident tax return (1040NR), the filing of which will require the IRS to issue an ITIN. The amount should be modest, to keep your tax liability to a minimum (for example, a reported 150 USD of income will result in a tax liability under 20 USD even with late filing penalties factored in).
The “created” income can be anything that does not involve actual work (as you are not allowed to work without a work permit). For example, gambling income, interest income from a private loan, a taxable referral bonus etc.
Instructions and pre-filled forms
We have built a tool that pre-fills the ITIN application forms for you based on a simple digital interview. All that you need to do is to print the forms, sign them and mail them along with your certified passport copy (obtained at the nearest US embassy or consulate), directly to the IRS. The tool is free to use, and removes the need to use a costly acceptance agent (the processing times are the same, the IRS does not offer a priority service). To access this tool, please refer to your welcome to membership email.
Application method two: Partnership
If you are a partner is a US partnership, including multi-member LLCs, you can apply for an ITIN when reporting your share of the partnership’s US income. If you registered your company with FS, get in touch and we will assist with the preparation of the application form.
Keeping your ITIN active
Your ITIN will expire three years after your last IRS filing. To keep it active, you should file a non-resident income tax return (1040NR) at least once every three years. You can do so using the strategy outlined in method one, minus the certified passport copy.
