ITIN or EIN? What a Foreign Owner Actually Needs for a U.S. Company or Property

The EIN: the business's number

An Employer Identification Number identifies an entity — an LLC, corporation, partnership, trust or estate. A foreign-owned single-member LLC is required to have an EIN because of the Form 5472 reporting rules, even though it is disregarded for income tax. Banks, payment processors and states generally require an EIN to open accounts and register the entity. The EIN application, Form SS-4, asks for the responsible party's SSN or ITIN, but foreign responsible parties without either can submit Form SS-4 by fax or mail and indicate that they have no such number. The online application requires an SSN or ITIN.

The ITIN: the individual's number

An Individual Taxpayer Identification Number is issued to individuals who need a U.S. taxpayer identification number for federal tax purposes but are not eligible for a Social Security number. The IRS issues ITINs only when there is a federal tax reason, and the application — Form W-7 — generally must be submitted with the federal tax return that requires the number, unless an exception applies.

Situations that typically require an ITIN

• Filing Form 1040-NR because of effectively connected income, U.S. rental income or a sale of U.S. property
• Applying for a FIRPTA withholding certificate or claiming a refund of FIRPTA withholding
• Being claimed as a spouse on a U.S. citizen's or resident's joint return, or electing resident treatment
• Claiming treaty benefits on certain types of income where a taxpayer identification number is required
• Being a partner in a U.S. partnership that must report the partner's information

Situations that usually do not

• Forming a U.S. LLC or corporation
• Filing Form 5472 for a disregarded LLC, which uses the LLC's EIN and requires the foreign owner's foreign tax identification number where applicable
• Opening a business bank account for the LLC, although individual banks may impose their own requirements

How the ITIN application works

Form W-7 must be accompanied by original identification documents or certified copies from the issuing agency — a passport alone is usually sufficient to establish both identity and foreign status. Applicants can mail originals to the IRS, visit certain IRS Taxpayer Assistance Centers, or use a Certifying Acceptance Agent, who can authenticate passports and certain other documents so the originals do not have to be mailed. Processing commonly takes several weeks and can be longer during filing season.

Exceptions to attaching a return

The W-7 instructions list exceptions under which an ITIN can be requested without a tax return — for example, where the applicant is receiving income subject to third-party withholding or claiming treaty benefits and a withholding agent requires a number, or in connection with certain real property transactions. Each exception has specific documentation requirements, such as a letter from the withholding agent or evidence of the transaction.

Keeping an ITIN active

An ITIN that is not included on a U.S. federal tax return at least once in three consecutive years expires at the end of the third year. A person whose ITIN has expired must renew it before filing a return that uses it, or the return may be processed with delays and without certain credits. Renewal uses the same Form W-7.

Common mistakes

• Applying for an ITIN only to open a bank account, which is not a qualifying reason
• Using the owner's ITIN in place of the LLC's EIN on business documents
• Providing a W-9 with an ITIN to a bank or platform, which represents U.S. person status
• Waiting until the week of a property closing to begin the ITIN process
• Letting an ITIN expire while still receiving U.S. rental income

Sources and official references

• IRS — Individual Taxpayer Identification Number (ITIN)
• IRS — Instructions for Form W-7
• IRS — Instructions for Form SS-4
• IRS — Employer ID numbers