ITIN rules that could impact your clients this season

You know that helping clients who don’t qualify for Social Security numbers means navigating a complex and often frustrating process. Understanding how individual taxpayer identification numbers (ITINs) work is essential if you want to protect your clients from refund delays or missed credits.

The rules change quickly, and without up-to-date knowledge, it's easy to make a small error that creates a big setback for your client.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Who needs an individual taxpayer identification number (ITIN)?

A: An ITIN is required for individuals who are not eligible for a Social Security number (SSN) but need to file a federal tax return or be listed on one, such as a spouse or dependent of a U.S. taxpayer.

Q: Can a taxpayer claim a dependent who lives in a foreign country using an ITIN?

A: Yes. A taxpayer may claim a foreign dependent if the individual meets the dependency rules, including the residency and relationship tests, and if the taxpayer provides over half of the person’s support during the year.

Q: Can a taxpayer claim the child tax credit (CTC) if the dependent has an ITIN?

A: No. To qualify for the CTC, a child must have a valid SSN issued by the return’s due date. Children with ITINs are not eligible for the CTC. However, they are eligible for the other dependent credit (ODC).

Q: If one spouse has an ITIN, can they still file as married filing jointly?

A: It depends. If one spouse is a nonresident alien and the other spouse is a resident alien by meeting the substantial presence test (SPT), the resident alien spouse may elect under IRC §6013(g) (if the nonresident alien is a spouse at the end of the year) or IRC §6013(h) (if the nonresident alien becomes a resident during the year) to treat the nonresident spouse as a U.S. resident for the entire tax year. This allows them to file jointly. However, it means both spouses’ worldwide income must be reported and is subject to U.S. tax.

If both spouses are U.S. residents by meeting the substantial presence test (SPT), they can file a joint return. No election would apply.

If they do not make the §6013(g)/(h) election and one spouse remains a nonresident alien, they cannot file jointly; they would typically file as married filing separately (MFS) or, in some cases, the U.S. spouse might qualify to file as head of household if certain conditions are met.