The United States Internal Revenue Service (IRS) issues an Individual Taxpayer Identification Number (ITIN) to those individuals who do not qualify for a Social Security Number (SSN) but need to report their U.S. income. This also applies to EB-5 investors.
United States law requires every person to pay taxes on the income they earn. The entity paying those wages is required by IRS to hold back the amount for income tax from the total income. In the case of EB-5 investors, this entity is usually the limited partnership or limited liability company which is responsible for making the investment into the job creating enterprise.
An ITIN may be necessary for a variety of reasons but the one most relevant to EB-5 involves earning income on investments. Tax identification is needed for those who earn from investments in the U.S. An ITIN must be obtained by all foreign nationals who receive income on business investments, limited partnership investments such as EB-5 offerings, or other equity/debt investments.
Why EB-5 Investors Need ITINs
In order to continue complying with government regulations, it is mandatory for EB-5 regional centers and general partners to ensure that foreign investors in the Program obtain their ITINs. This identification number is necessary for 1) appropriate income tax withholdings on the distributions made to EB-5 investors, 2) submission of accurate annual statements to the IRS, and 3) eliminating the risk of penalties and fines which may result from not complying with IRS laws. Compared to the chances of foreign investors being fined for inaccurately disclosing income, the chances of the IRS penalizing fund managers and regional centers for not withholding income tax properly are much higher. The U.S. entity is more obliged to follow the tax laws of the United States and must ensure that associated investors also comply with rules and regulations properly.
Paying taxes on income is equally crucial for EB-5 investors since successfully migrating to the U.S. depends on their compliance with the laws of the country. General partners are better equipped to withhold income tax with the help of ITINs, so that the EB-5 investor may fulfill all tax obligations toward the IRS. When investors are able to maintain compliance with IRS laws through properly withheld income on their investment funds, they can avoid the need to file additional documentation before being approved for permanent residency.
How EB-5 Investors Obtain Their ITINs
ITIN applications can be filed by individuals on their own, but some applicants face difficulties in filling out the IRS forms. They are also required to identify any applicable exemptions or designations in the form which is cumbersome for investors. Additionally, the original passports and other proofs of identification need to be processed by the IRS and must be mailed by the individual for this purpose. During the months it takes for processing, the investor must remain without their essential documents. The likelihood of errors also increases due to foreign postal addresses that need translating, so there is a risk of those important documents getting misplaced in the post after IRS processes and returns them by mail.
An ITIN can be more easily obtained by hiring a Certified Acceptance Agent (CAA) to do all the work on the investor’s behalf. The IRS issues licenses to CAAs for assistance in applying for an ITIN so that they may streamline the process and engage with the investors, the IRS, and the EB-5 fund and its managers. CAAs are typically retained by the EB-5 fund directly, and the limited partnership pays for their services. Applications are filled out by the CAAs, and the need to mail documents to the IRS is eliminated due to the CAA’s involvement and their ability to certify documents. CAAs ensure the process goes smoothly by serving as the link between investors and the IRS.
How Can We Help?
EB5Investors.com has teamed up with ITIN Pros who specialize in tax ID procurement services on behalf of foreign investors. In the U.S., income-paying entities like EB-5 funds are required to withhold income taxes prior to distributing income to individuals. It’s the responsibility of the EB-5 fund or regional center to ensure investors have ITINs to comply with IRS rules and regulations. If the fund fails to properly withhold taxes, it may be penalized or fined by the IRS. ITIN Pros is a government authorized certified acceptance agent, which grants it the authority to certify original documents and obtain individual tax identification numbers (ITINs) on behalf of its foreign clients. ITIN Pros specializes in assisting so regional centers and fund managers comply with IRS regulations and fulfill their US tax reporting obligations effectively. ITIN Pros’ services are tailored for EB-5 investments and are a fast, cost effective solution for investors, regional centers and fund managers (Cost: One time flat fee of $400 per application).