Jean Chatzky
Do one thing: You don’t need to pay someone to help you obtain an ITIN from the U.S. government. It’s a straightforward process detailed on the IRS website.
Millions are using ITINs in the U.S.
Building credit for a small business works differently from personal credit, and an ITIN can open more doors than some new entrepreneurs expect, especially for non-residents who are not eligible for a Social Security number. Read on to explore the basics of establishing a business credit profile from scratch with an ITIN.
Facts about ITINs
- More than 2.5 million federal tax returns were filed by workers with ITINs in 2019, according to the Urban Brookings Tax Policy Center, with a reported tax liability of almost $6 billion.
- There were more than 5.8 million active ITINs in 2022, according to data from the Treasury Inspector General for Tax Administration.
Certified Financial Planner Joon Um, EA, CLU, ChFC, with Secure Tax & Accounting, Inc. in Beverly Hills, says getting an ITIN is more helpful than many immigrant business owners realize. Here are the steps he suggests when it comes to establishing business profiles for immigrants using an ITIN.
Get an Individual Taxpayer Identification Number (ITIN)
To comply with US tax laws, immigrants and nonresident aliens working in the U.S. without a Social Security number should apply for an Individual Taxpayer Identification Number (ITIN) by visiting IRS.gov and following the steps to fill out a Form W-7.
ITINs Explained
An ITIN is a tax-processing number issued by the IRS to make sure those working in the US pay taxes. While that is not what it was originally intended for, an ITIN is also accepted by several financial institutions by those who want to open a checking or savings account but don’t have a Social Security number.
Protip: Non-residents need an ITIN to be able to apply for an employer identification number with the IRS.
The Timeline for Getting an ITIN
When applying for an ITIN, you’ll need to pack your patience. That’s because the process can typically take almost two months, generally about seven weeks, outside of tax season, according to the IRS. Applying for and receiving your number often takes even longer in March and April, when millions are filing their income taxes.
Apply for an Employer Identification Number (EIN)
For non-residents, Um also recommends applying with the IRS for an EIN, or employer identification number.
According to the IRS, you need an EIN if you:
- Have employees
- Will need to pay employment taxes
- Withhold taxes on income, other than wages, paid to a non-resident alien
Some of the most common business uses for EINs are
- Building business credit
- Forming an LLC
- Opening a business bank account
- Setting up retirement or pension plans
Those who don’t need an EIN for federal tax purposes can still request one for banking or state tax purposes, according to data from the IRS. It’s important to keep in mind that EINs are not intended to be used for state tax lien auctions, sales, or lotteries.
Make Your New Business Official
To make your new business official, you’ll need to file articles of incorporation or establish an LLC, a limited liability company, to ensure the firm will be viewed as separate from your personal finances and credit profile.
Keeping Business and Personal Finances Separate
When starting a new company profile, whether you are an immigrant or lifelong U.S. resident, it’s smart to separate your personal finances from those of your business. This can also help limit any liability of your personal assets with a company you establish.
Open a Business Bank Account
To that end, immigrants and non-residents living in the U.S. can use a newly acquired EIN to open a business bank account. Most financial institutions in the U.S. require this employee identification number for such accounts.
Open a Business Credit Card
Next, notes Um, you should open a credit card strictly for your company. Why? One big reason is that business credit is different from personal credit and is generally based on a company’s spending history, among other factors.
Register with Business Credit Bureaus
You will also want to register your company with these three separate business credit bureaus:
- Dunn & Bradstreet
- Equifax Business
- Experian Business
Building a Solid Business Profile Conclusion
Just like with personal credit, you need to make sure to pay your business bills on time – or early – every time. “New businesses may still require a personal guarantee,” Um says, “but establishing a clean business credit history early can make financing much easier later.”
With reporting by Casandra Andrews
*The content of this article is intended for educational purposes only. It is not to be used as tax, legal, or financial advice. For personal and business advice, consult with tax, legal, and financial professionals.
Matthew Mack
