Exceptions to the requirement that a U.S. Federal Income Tax Return Accompany an ITIN Application – IRS Form W-7

You can indeed claim an exception to the requirement to submit an original U.S. Federal income tax return with IRS Form W-7 – ITIN Application, all you need is substantiated proof of your claim.

So what are the exceptions allowing for the ITIN application without a tax return and how do you substantiate your claim?

Exception 1. “Third Party Withholding on Passive Income”

Banks and other financial institutions subject to IRS information reporting or tax withholding from your account will request a taxpayer identification number from you to enable them to comply with U.S. Treasury Regulations.

As an individual to obtain an taxpayer identification number (ITIN) under this exception, you must include supporting documentation with your Form W-7 showing that you own an income generating asset subject to IRS information reporting and/or tax withholding requirements for the tax year.

A letter or signed statement from your bank, financial institution or withholding agent must be attached.

Exception 2. “Wages, Salary, Compensation and Honoraria Payments with Tax Treaty Benefits Claimed; Scholarships, Fellowships and Grants with Tax Treaty Benefits Claimed; Scholarships, Fellowships and Grants – No Tax Treaty Benefits Claimed; or Gambling Winnings with Tax Treaty Benefits Claimed”

YIKES! Not to worry it is basically broken down to the fact that if you received US $$ you have some tax reporting and perhaps paying obligation and you should track what you did to receive the $$.

If $$ was received for …

a. Wages, Salary or Compensation and Honoraria Payments – Tax Treaty Benefits claimed.

IRS information reporting and tax withholding is required and applies to third parties who will request a TIN from you so as to comply with U.S. Treasury Regulations.

To obtain a TIN under this exception, you must attach a letter from the SSA denying your request for a Social Security Number.

b. Scholarship, Fellowship or Grant Income.

This applies to the Student and Exchange Visitor Program (SEVP) approved institutions for non-resident alien students and exchange visitors, their spouses and dependents classified under section 101(a)(15)(F), (M) or (J) of the Immigration and Nationality Act {8 U.S.C. 1101(a) (15)(F), (M) or (J)}

A certification letter from the approved institution is required for each Form W-7 application: primary, associated secondary (spouse) and dependent(s). î®

c. Gambling Winnings – Tax Treaty Benefits claimed.

If you are a nonresident alien visitor with gambling winnings, your Form W-7 will be processed under ‘exception (2)’ only if submitted through the appropriate gaming official serving as an authorized ITIN Acceptance Agent. Good luck finding one!

Exception 3. “Third Party Reporting of Mortgage Interest Under the Internal Revenue laws, most recipients (lenders) of home mortgage interest report the amount of interest they receive from the borrower to both the IRS and the borrower.”

This reporting is usually done on a Form 1098, Mortgage Interest Statement. First time filers who secure a home loan may seek an ITIN to provide to their lender. I usually submit a copy of the mortgage cover page in these circumstances.

Exception 4. “Third Party Withholding – Disposition by a Foreign Person of United States Real Property Interest A tax withholding obligation is generally imposed on a buyer or other transferee (withholding agent) when a United States real property interest is acquired from a foreign person.”

This withholding serves to collect the tax that may be owed. In some instances, you may apply for a withholding certificate to reduce or eliminate withholding on the disposition of the real property. An ITIN would be needed for this transaction.

For this exception I was advised by the IRS ITIN Hotline to send in a copy of any forms relevant to “pre-sale” agreement.

Exception 5. “TD-9363. This exception may apply if you have an IRS reporting requirement under Treasury Decision 9363 and are submitting Form W-7, Form 13350, and supplemental documentation.”

The only thing I can share with you about this exception at present is that as of the original publishing of this post IRS Form 13350 is unilaterally undetectable anywhere at www.IRS.gov and the ITIN Practitioner Hotline phone staff nor their managing supervisors could explain to me what this form is all about.

I will be following up with regards to this exception.