The U.S. IRS released new draft instructions for Form W-7 (Application for IRS Individual Taxpayer Identification Number). Certain taxpayers who are seeking an Individual Taxpayer Identification Number will no longer need to obtain a letter from the U.S. Social Security Administration confirming their ineligibility to receive a social security number. There are other changes with the new draft instructions.
The U.S. Internal Revenue Service (IRS) has released new draft instructions for Form W-7, Application for IRS Individual Taxpayer Identification Number.1 These draft instructions remove the requirement that certain taxpayers seeking an Individual Taxpayer Identification Number (ITIN) must obtain a letter from the U.S. Social Security Administration (SSA) stating that they are ineligible to receive a social security number.
|The removal of the requirement to obtain a letter from the SSA rejecting a claim for a social security number is a welcome development for many individuals seeking ITINs, in particular short-term business travelers claiming relief from U.S. tax under the provision of an income tax treaty.|
In general, an individual can only apply for an ITIN when filing a tax return for which the ITIN is needed. However, there are certain exceptions that permit individuals to apply for an ITIN prior to filing a tax return. One of these exceptions (referred to as ‘Exception #2’ in the instructions to Form W-7) applies to individuals who are claiming the benefits of a tax treaty pursuant to which they are exempt or subject to a reduced rate of tax on their wages or compensation for services performed in the United States. Such individuals claim the exemption or reduced rate of withholding by completing and submitting to their employer Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.
Whereas the current instructions to Form W-7 provide that such individuals must include with their application a letter from the SSA stating that they are ineligible to receive a social security number, the new draft instructions remove this requirement.
Another change included with the new draft instructions is a statement that, beginning in 2016, the IRS will deactivate an ITIN that has not been used on at least one tax return in the past five years. See Flash International Executive Alert 2014-062 (July 2, 2014) for more information on this development.
The new draft instructions are not yet in effect. They are expected to enter into effect for ITIN applications submitted on or after January 1, 2015, but are subject to change before they are issued in final form.
The following information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.