The US banking sector offers some of the best products in the world, and for those without a SSN, an ITIN represents an easy way in with very few downsides. In this guide, I explain why it makes sense to apply for an ITIN, how and the implications.
US ITIN, why and the implications
A US ITIN is a tax ID, issued by the IRS, to non-residents who need to file US returns, have other qualifying filing or withholding tax liabilities and to residents who are not eligible for a SSN. The format is the same as for SSNs, except that ITINs always begin with a 9. This similarity allows ITINs to be used in lieu of SSNs, in most circumstances, and this includes when passing credit checks and fulfilling KYC requirements.
US banks typically rely on credit checks to identify applicants, as part of their KYC procedures, because someone with a US credit history already has US banking products, meaning they have already been identified by another US bank (the piggyback system). There is also an assumption that the federal government has IDed the SSN / ITIN holder.
As a result, someone with an SSN / ITIN and US credit history can often open bank accounts (and apply for other financial products) without having to present any ID, proof of residence or other supporting documents.
While being able to open bank accounts remotely, and without having to provide supporting documents, is a great benefit in and of itself, being able to apply for US credit cards (and other credit products) is an even greater benefit. That is because US credit cards offer significantly better benefits than cards anywhere else in the world, especially to those of use who are frequent travellers.
Having an ITIN can also open access to a significant number of US payment processing services, for those with an LLC.
As for the implications, besides the hassle of applying for the ITIN, there are none that I can think of. Having an ITIN will not create a US filing liability and / or tax liability.
Application method one: 1040NR
This method is by far the easiest, and most reliable, way for a non-US resident to apply for an ITIN. Essentially, the idea is to “invent” US ECI (taxable income), report said income via a non-resident tax return (1040NR), the filing of which will require the IRS to issue an ITIN. The amount should be modest, to keep your tax liability to a minimum (for example, a reported 150 USD of income will result in a tax liability under 20 USD even with late filing penalties factored in).
The “invented” income can be anything that does not involve actual work (as you are not allowed to work without a work permit). For example, gambling income, interest income from a private loan, a taxable referral bonus etc.
Do note that to use gambling income, you should have entered the US at least once during the fiscal year you are filing for, and should have visited at least one location where gambling is legal (to be bulletproof).
Instructions and pre-filled forms
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Application method two: Treaty benefits
If you cannot use the 1040NR method, the treaty benefits method may be an alternative (if there is a tax treaty between your country of tax residence and the US). It relies on claiming treaty benefits, on royalties income paid by a US based business to yourself (most treaties reduce or eliminate US withholding tax on royalties income). If you do not already receive such income, the easiest way to generate royalties income liable to US withholding tax is to self publish an ebook in the US market on a platform such as Amazon, Smashwords or via a service like Draft2Digital. Once your book is up for sale, you can ask the platform / service for an ITIN letter, which can then be used as your justification for applying for an ITIN. A sample letter is available for download in the Instructions and pre-filled forms section below, and can be used in case you cannot obtain a letter from a publishing platform / service.
Instructions and pre-filled forms
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Next steps
With your ITIN application sorted, your next should be to prepare your US banking strategy. I have written a guide on the subject, you can read it here. You should also read my guide about AmEx Global Transfer and my guide about VPN and VPS for banking.
