The US tax system is usually complicated, particularly in determining whether one is eligible for tax credits without a Social Security Number (SSN). Although an SSN is usually necessary for most tax credits, the Internal Revenue Service (IRS) has alternatives for individuals who are unable to obtain an SSN but must still comply with tax requirements.
Individual Taxpayer Identification Number (ITIN): A substitute for SSN
For individuals not qualifying for an SSN, the IRS issues the Individual Taxpayer Identification Num. An ITIN is a nine-digit federal tax identification number that allows non-SSN holders to file tax returns and pay taxes. The IRS explains that “An ITIN is issued by the IRS for federal tax purposes only.”
Eligibility for Tax Credits with an ITIN
ITIN enables tax filing but not every tax credit. This is how ITIN holders stack up for some credits:
- Earned Income Tax Credit (EITC)
EITC is a refundable tax credit that may be claimed by low- and moderate-income working individuals. For the taxpayer and qualifying children to be qualified, each of them must have valid SSNs that were issued by or on the filing deadline for the return. The IRS requires, “For the EITC, your client, your client’s spouse (if filing jointly), and each qualifying child claimed for the EITC on Schedule EIC must have a Social Security number (SSN) issued on or before the due date of the return (including extensions).” ITIN holders are therefore not usually eligible for the EITC.
- Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)
For tax years 2018-2025, each eligible child must possess a valid SSN for employment in the United States, which was issued before the return-filing deadline. The taxpayer (and spouse if filing jointly) may possess an SSN or an ITIN, however. The basics from the IRS include, “The requirements for your client’s taxpayer identification number haven’t changed – Your client and his or her spouse (if filing jointly) must have an SSN or individual taxpayer identification number (ITIN) issued on or before the due date of the return (including extensions).” That would mean that while parents with ITINs can receive the CTC or ACTC, the child must have a valid SSN.
- Credit for Other Dependents (ODC)
The ODC gives a nonrefundable credit of $500 to dependents who are ineligible for the CTC. For tax years 2018-2025, the taxpayer, spouse (in the case of joint return), and each dependent or relative child must have an SSN, ATIN, or ITIN on or before the due date for the return. As per the IRS, “For the ODC, for tax years 2018-2025, your client, your client’s spouse (if filing jointly), and each qualifying child or qualifying relative for the ODC must have an SSN, an adoption taxpayer identification number (ATIN), or an ITIN issued on or before the due date of the return.” Hence, ITIN holders can claim ODC for dependents who hold valid TINs.
- American Opportunity Tax Credit (AOTC)
The AOTC allows a credit for qualified education expenses for eligible students. To qualify for this credit, the taxpayer, spouse (if filing a joint return), and student must obtain an SSN, ATIN, or ITIN by the due date of the return. The IRS clarifies, “For the AOTC, your client, your client’s spouse (if filing jointly), and the student claimed for the AOTC must each have an SSN, an ATIN, or an ITIN issued on or before the due date of the return (including extensions).” Therefore, ITIN holders are eligible for the AOTC.
Obtaining an ITIN
To obtain an ITIN, applicants must complete IRS Form W-7, “Application for IRS Individual Taxpayer Identification Number.” It requires documentation substantiating identity and foreign status. The IRS advises, “To receive an ITIN, you must complete IRS Form W-7, IRS Application for Individual Taxpayer Identification Number.”
Application for an ITIN should be submitted before the tax return due date to be able to obtain timely processing and avoid delays in entitlement to qualified credits.
Limitations and considerations
Although an ITIN enables individuals to meet tax requirements and qualify for certain credits, it does not make them legally able to work in the US or entitle them to Social Security benefits. Some credits, such as the EITC, are also restricted to those with valid SSNs. Taxpayers must be aware of the differences to comply and reap the most tax benefits.
