SSN, ITIN & Residency Status

Taxpayer identification numbers and residency status are fundamental concepts for federal income tax purposes. The type of identification number a taxpayer holds affects their ability to claim credits, while residency status determines how their income is taxed. Understanding these rules is essential for serving clients who are immigrants, nonresident aliens, or have family members without Social Security Numbers.

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Social Security Numbers (SSN)

What is an SSN?

A Social Security Number (SSN) is a 9-digit number issued by the Social Security Administration (SSA). The format is XXX-XX-XXXX (e.g., 123-45-6789). SSNs are required for:

• Filing federal tax returns
• Claiming tax credits and deductions
• Employment eligibility verification
• Opening bank accounts and applying for credit

Who Can Get an SSN?

The SSA issues SSNs to individuals who fall into these categories:

SSN vs. Work Authorization: An SSN may be issued with or without work authorization. Cards issued without work authorization are marked "NOT VALID FOR EMPLOYMENT" - these SSNs cannot be used to claim the Earned Income Tax Credit.

SSN Requirements for Tax Returns

Every taxpayer, spouse (on a joint return), and dependent claimed on a federal tax return must have a valid SSN or ITIN. Key requirements:

1. Taxpayer SSN - Required on Form 1040 (or ITIN if not SSN-eligible)
2. Spouse SSN - Required on joint returns
3. Dependent SSN - Required to claim someone as a dependent

Due Date Requirement: For certain credits, the SSN must be issued on or before the due date of the return (including extensions). For calendar year 2024 returns, this is generally October 15, 2025.

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Identity Protection PIN (IP PIN)

What is an IP PIN?

An Identity Protection Personal Identification Number (IP PIN) is a 6-digit number that helps prevent identity theft on tax returns. When you have an IP PIN, it must be included on any federal tax return you file.

Key IP PIN Facts for 2024

How to Obtain an IP PIN

1. Online (fastest) - Through IRS Online Account at irs.gov
2. Form 15227 - For taxpayers with income below $79,000 (individual) or $158,000 (MFJ) who cannot verify identity online
3. In-person - At a Taxpayer Assistance Center with two forms of ID

Exam tip: The IRS will never call, email, or text to request your IP PIN. Requests for IP PINs are a common fraud tactic.

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Individual Taxpayer Identification Numbers (ITIN)

What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the IRS to individuals who:

• Are not eligible for an SSN, AND
• Need to file a federal tax return or be listed on a return

ITIN Format

ITINs have a specific format that distinguishes them from SSNs:

Format: 9XX-7X-XXXX or 9XX-8X-XXXX

Examples:

• Valid ITIN: 912-78-1234
• Valid ITIN: 900-70-5678
• NOT an ITIN: 123-78-4567 (doesn't start with 9)

Who Needs an ITIN?

How to Apply for an ITIN

File Form W-7 (Application for IRS Individual Taxpayer Identification Number) with:

1. Completed Form W-7 - Signed by applicant or authorized representative
2. Supporting documents - Passport (best option - proves both identity and foreign status) OR combination of documents proving identity and foreign status
3. Federal tax return - Attach Form W-7 to the front of the tax return

Processing Options:

Processing Time: 7 weeks typically; 9-11 weeks during tax season (January 15 - April 30) or for overseas applications.

ITIN Expiration Rules

ITINs can expire in two ways:

1. Non-use Expiration:

An ITIN expires if not used on a federal tax return for 3 consecutive tax years.

Example: If an ITIN was last used on a 2020 tax return, it expired on December 31, 2023 (after 3 years of non-use: 2021, 2022, 2023).

2. Pre-2013 ITIN Expiration Schedule:

ITINs issued before 2013 have already expired or follow specific expiration schedules based on the middle digits:

Renewal: Expired ITINs must be renewed by submitting Form W-7 with supporting documentation before filing a tax return.

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SSN vs. ITIN for Tax Credits

The type of taxpayer identification number directly impacts credit eligibility. This is a high-priority exam topic.

Credit Eligibility Comparison

Key Rules by Credit

Earned Income Tax Credit (EITC):

• Everyone on the return must have a valid SSN: taxpayer, spouse, AND all qualifying children
• The SSN must be "valid for employment" - SSNs marked "NOT VALID FOR EMPLOYMENT" do not qualify
• If only the taxpayer has a valid SSN (no qualifying children with SSN), they may claim the childless EITC

Child Tax Credit (CTC) / Additional Child Tax Credit (ACTC):

• The qualifying child MUST have a valid SSN issued by the return due date (including extensions)
• If the child has an ITIN instead of SSN, the child does not qualify for CTC/ACTC
• However, that child MAY qualify for the Credit for Other Dependents (ODC) - worth $500

Example: Maria has two children. Her son Carlos has an SSN; her daughter Elena has an ITIN.

• Carlos qualifies for up to $2,000 Child Tax Credit
• Elena does NOT qualify for CTC but qualifies for $500 Credit for Other Dependents
• Total potential credits: $2,500

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Residency Status for Tax Purposes

Tax residency is different from immigration status. A person can be a nonresident for immigration purposes but a resident for tax purposes, or vice versa.

Three Tax Residency Categories

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Green Card Test

The Green Card Test is straightforward:

You are a resident alien for tax purposes if you are a lawful permanent resident (Green Card holder) at any time during the calendar year.

Key Points:

• Residency starts on the first day you are present in the U.S. as a lawful permanent resident
• Status continues until administratively or judicially terminated, OR you voluntarily abandon it
• Abandonment requires filing Form I-407 with USCIS or a U.S. consular officer
• A Green Card holder who has been a resident for 8 of the last 15 years may be subject to expatriation tax upon giving up status

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Substantial Presence Test

If you don't have a Green Card, you may still be a resident alien if you meet the Substantial Presence Test.

The Two Requirements:

1. 31-Day Requirement: You must be physically present in the U.S. for at least 31 days during the current year.

2. 183-Day Formula: You must be present for at least 183 days during a 3-year period using this weighted formula:

Formula: Current year days + (1/3 x first prior year days) + (1/6 x second prior year days) >= 183

Example Calculation:

Alex was present in the U.S. for:

• 2024: 120 days
• 2023: 120 days
• 2022: 120 days

Calculation for 2024:

• 2024: 120 days x 1 = 120
• 2023: 120 days x 1/3 = 40
• 2022: 120 days x 1/6 = 20
• Total: 180 days (less than 183)

Alex does NOT meet the Substantial Presence Test for 2024.

Days NOT Counted:

Certain days of physical presence are excluded:

Exempt Individuals:

These individuals do NOT count their days of presence for the Substantial Presence Test:

Closer Connection Exception

Even if you meet the Substantial Presence Test, you may be treated as a nonresident alien if ALL of the following apply:

1. You were present in the U.S. for fewer than 183 days in the current year
2. You maintained a tax home in a foreign country throughout the year
3. You had a closer connection to that foreign country than to the U.S.
4. You timely file Form 8840 (Closer Connection Exception Statement for Aliens)

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Dual-Status Aliens

A dual-status alien is someone who was both a resident alien AND a nonresident alien during the same tax year. This typically occurs in the year of arrival or departure.

When Dual-Status Occurs:

Dual-Status Filing Requirements:

Step 1: Determine your status on December 31:

• If resident on 12/31: File Form 1040 as primary return
• If nonresident on 12/31: File Form 1040-NR as primary return

Step 2: Attach a statement:

• Write "Dual-Status Return" on the primary form
• Attach a statement (or the other form) showing income for the other period
• Write "Dual-Status Statement" on the attached document

Dual-Status Restrictions:

Exception: Nonresident Spouse Election

A dual-status alien (or nonresident alien) married to a U.S. citizen or resident alien may elect to be treated as a resident for the entire year under IRC Section 6013(g) or (h). This allows:

• Filing a joint return with the spouse
• Using the standard deduction
• Accessing all credits for which otherwise eligible

Trade-off: The electing spouse's worldwide income becomes subject to U.S. taxation for the entire year, and FBAR/FATCA reporting requirements apply.

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First-Year Election

A taxpayer who doesn't meet the Green Card Test or Substantial Presence Test in the current year may still elect to be treated as a resident for part of the year if:

1. They are present in the U.S. for at least 31 consecutive days in the current year
2. They are present for at least 75% of the days from the start of that 31-day period through year-end (with up to 5 days of absence treated as present)
3. They meet the Substantial Presence Test in the following year

This is called the First-Year Choice and results in dual-status treatment for the election year.

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Summary Comparison Table

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Exam Tips

1. ITIN format - Remember: starts with 9, 4th-5th digits are 70-88 or 90-99
2. EITC is strict - Everyone (taxpayer, spouse, qualifying children) needs work-authorized SSN
3. CTC child requirement - The CHILD must have SSN; parents can have ITIN
4. Education credits are flexible - SSN or ITIN is acceptable
5. Substantial Presence formula - Current year (100%) + prior year (1/3) + 2nd prior year (1/6) >= 183
6. Students are exempt - F, J, M, Q visa students don't count days for first 5 years
7. Dual-status = no standard deduction - Must itemize, cannot file jointly (unless electing full-year residence)