Financial Services Bulletin 97/98- 08
(Superseded by FSB 97/98-24)

 

January 12, 1998

 

M E M O R A N D U M

 

TO: All Department Chairpersons, Deans, Administrative Heads, CAP Representatives
FROM: Thad J. Dorsey, Jr.
Director of Accounting
SUBJECT: Nonresident Aliens - Taxpayer identification numbers now required

 

The Internal Revenue Service (IRS) recently issued regulations that require all payers to Nonresident Aliens (NRA) to obtain a U.S. issued taxpayer identification number from the NRA. Currently the Health Science Center requires a Social Security Number only for payroll payments. In addition, beginning in 1999, the IRS will not accept Form 8233 (the form used by the NRA to file for tax treaty exemption from withholding) without a U.S. taxpayer identification number. Currently a taxpayer identification number is not required on Form 8233.

The new regulations also require that the Health Science Center provide a taxpayer identification number on all information Forms 1042-S issued after January 1, 1999. This means that the Health Science Center must start obtaining a taxpayer identification number beginning with calendar year 1998 payments in order to properly report these payments to the IRS beginning in January, 1999. In addition, under proposed regulations, after January 1, 1999 it will be illegal for the Health Science Center to give tax treaty benefits to a NRA who has no permanent identification number, or who has not applied for such a number.

EFFECTIVE MARCH 1, 1998, ALL PAYMENTS TO NONRESIDENT ALIENS (NRA) WILL BE SUBJECT TO WITHHOLDING, AT THE BACKUP WITHHOLDING RATE OF 31%, IF THE NRA DOES NOT FURNISH A PERMANENT TAXPAYER IDENTIFICATION NUMBER.

A permanent taxpayer identification number is either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). If the NRA does not have a SSN or ITIN, first determine if they qualify for a SSN by contacting the local Social Security office. If the individual qualifies for a SSN, have the NRA process Form SS-5, Application for Social Security Number, in person at the local Social Security office. If the individual does not qualify for a SSN then they must apply for an ITIN.

Obtaining an Individual Taxpayer Identification Number (ITIN)

An Individual Taxpayer Identification Number (ITIN) is obtained by first completing a Form W-7, Application for IRS Individual Taxpayer Identification Number (attached). This form together with certain original documentation must be presented to the IRS in one of three methods:

1. In person at the local IRS, Taxpayer Service Office located at 5835 Callaghan Rd (Summit Towers II). Their hours are M-F, 8:30a.m. to 4:00p.m.
2. In person at certain U. S. consular offices
3. By mail

Certain original documentation (or certified copies) is required to be submitted to the IRS in order for the IRS to certify that the information on the W-7 is correct. The documentation requirements are detailed in the instructions to the Form W-7.

The IRS has also issued a publication entitled "Understanding Your IRS Individual Taxpayer Identification Number". This brochure may be obtained through the Office of International Affairs. 

 

The local IRS office will ask for an original passport to provide evidence of alien status and proof of identity. If the individual does not have a passport, it is my understanding that the local IRS office will require originals or certified copies by the issuing agency of at least two of the following:

1.

Drivers license

2.

Birth certificate

3.

Marriage certificate

4.

Other U. S. Immigration documents

 

The IRS will compare the documentation submitted to the completed W-7. If everything is in order the IRS will certify to the correctness of the W-7 and will forward the completed W-7 to the IRS Philadelphia Service Center. The Philadelphia Service Center will then issue an ITIN and mail notice of the ITIN to the mailing address noted on the W-7. The instructions to the W-7 state that this process should take about two weeks. However, it is my understanding that the process may take up to one month.

At the time of this writing is it not known what particular consular offices are participating in the ITIN application process. It is assumed that participating consular offices will follow the same procedures as outlined above for applying at the local IRS office.

Mailing the W-7 and required documentation should be considered as a last resort as originals of documents must be mailed to the IRS. Please refer to the instructions to the form W-7 if this option is chosen.

W-7 forms may be downloaded from the Internet at http://www.irs.ustreas.gov/prod/cover.html. Adobe Acrobat Reader is required to view and print the form and can be downloaded for free off the Internet. If you do not have access to the Internet contact Selena Benavides in the Office of Accounting (6103) or myself at 6084. You may also copy the W-7 form attached.

This Financial Services Bulletin supercedes Financial Services Bulletin #96/97-08 (Revised). If you have any questions or if I may assist in any way, please contact me at X6084 or E-mail me at dorsey@uthscsa.edu.