Do I Need an ITIN? A Guide for Non-Resident Founders of U.S. Companies
Launching a company in the United States is an exciting prospect for entrepreneurs around the globe. While the process of incorporation can be straightforward, navigating your personal obligations within the U.S. tax system is a critical next step. For a non-resident founder without a U.S. Social Security Number (SSN), the key to this process is the ITIN.
Understanding what an ITIN is and when you need it is fundamental to staying compliant and successfully operating your U.S. venture.
What is an ITIN?
An ITIN, or Individual Taxpayer Identification Number, is a nine-digit tax processing number issued by the Internal Revenue Service (IRS).
Its sole purpose is to help individuals who are not eligible for an SSN comply with U.S. tax laws. It serves as the identification number for your personal U.S. tax filings and reporting.
It’s crucial to understand what an ITIN is not:
- It does not authorize you to work in the U.S.
- It does not provide eligibility for Social Security benefits.
- It does not change or affect your immigration status.
Think of it simply as your unique ID for all interactions with the U.S. tax system.
When Do I Need an ITIN as a Non-Resident Founder?
As a founder of a U.S. company, the need for an ITIN is typically triggered by a specific tax-related event. Here are the most common scenarios you will encounter:
1. When You Have a U.S. Personal Tax Filing Requirement
This is the most direct reason. You will need an ITIN when you are required to file a U.S. personal income tax return, Form 1040-NR (U.S. Nonresident Alien Income Tax Return). This requirement is often triggered if you:
- Receive a salary or other compensation from your U.S. company.
- Are a member of a U.S. partnership that generates income.
- Have other income that is “effectively connected” with your U.S. trade or business.
Typically, you apply for your ITIN using Form W-7 at the same time you file your first Form 1040-NR. You cannot file the tax return without a taxpayer identification number.
2. When You Need to Claim a Tax Treaty Benefit
Your U.S. company might pay you dividends or other U.S.-sourced income. By default, the U.S. imposes a 30% tax on this type of income for foreign persons, which is withheld before you receive it. However, a tax treaty between the U.S. and your home country may allow for a reduced rate of withholding. To claim these treaty benefits, you will need an ITIN.
3. When Opening a U.S. Business Bank Account
While not a direct IRS requirement for an ITIN, this is a common practical hurdle. Many U.S. banks require a personal taxpayer identification number from the foreign beneficial owners of a business account. While the business itself will have an EIN (Employer Identification Number), the bank may still require an ITIN from you as the founder to complete their due diligence.
How to Apply for an ITIN
The most common way to apply is by submitting Form W-7, Application for IRS Individual Taxpayer Identification Number, along with your completed federal income tax return (e.g., Form 1040-NR). You must also include original or certified copies of documents that prove your foreign status and identity, such as a valid foreign passport.
Because the process requires careful attention to detail, many founders choose to work with an IRS-authorized Certifying Acceptance Agent (CAA). A CAA can verify your identity documents, which means you don’t have to mail your original passport to the IRS, and can help ensure the application is completed correctly.
Your Bridge to U.S. Tax Compliance
For a non-resident founder, obtaining an ITIN is a rite of passage. It signifies that you are officially interacting with the U.S. tax system and are taking the necessary steps to operate in full compliance.
At Taxculate, we guide international founders through every step of this process—from identifying the need for an ITIN to preparing the necessary tax returns and applications. We ensure you have the right tools to build your U.S. business on a solid, compliant foundation.
