Every U.S. taxpayer is required to have an identification number used to submit their U.S. federal and state income tax returns. The IRS requires U.S. citizens to use the number assigned to them at birth by the U.S. Social Security Administration for future social security benefits, which is commonly known as the Social Security Number (SSN). Everyone else must apply directly with the Internal Revenue Service (IRS) to be assigned an Individual Taxpayer Identification Number (ITIN). U.S. citizen are not eligible to request an ITIN. In order for a U.S. citizen to file a U.S. federal income tax return, he or she must have an SSN.
Please take note that a new rule requires anyone renewing their U.S. passport to provide an SSN. Given the fact that there are thousands of Americans living overseas since childhood who never applied for a social security number, this new rule will result in the effective banishment of U.S. citizens that have never been assigned an SSN. You cannot enter the U.S. with an expired passport.
A common scenario with many of our clients is that they are now working adults with families, and they now wish to relinquish their U.S. citizenship. If you relinquish your citizenship without being tax compliant, the IRS can impose the Mark-to-Market Exit Tax on your worldwide assets. This would immediately subject all built-in gain in worldwide assets to U.S. taxation, and the IRS will fully utilize the provisions of income tax treaties to compel foreign tax authorities to enforce any tax assessment against you. Please keep in mind that this is the same IRS that recently pierced through Swiss bank secrecy laws and compelled Swiss banks to turn over records on thousands of Americans. Even the Cayman Islands has become a signatory to the U.S. Foreign Account Tax Compliance Act (FATCA). Although there are still a few less desirable jurisdictions remaining where clients can flout U.S. tax law, the days of playing “hide the ball” from the IRS are largely over.
Given the fact that the IRS now has an amnesty program that takes all penalties off the table, it’s time to considering applying for an SSN and becoming compliant with your U.S. tax filing obligations; even if it’s just to immediately relinquish your citizenship.
Applying for an SSN as an Adult
The first step to acquiring a U.S. social security number is to fill out SSA Form SS-5, Social Security Administration Application for a Social Security Card; click here. The second step is to submit the application in-person at your local U.S. embassy or consulate; click here. You may be required to visit a specific embassy outside of your country if the local embassy is not properly trained to handle your case; click here. In cases where travel is required, most our clients have preferred to simply travel to the U.S. to apply in-person in Washington DC.
You will be required to bring evidence establishing three things: (1) your age, (2) your identity, and (3) your status as a U.S. citizen. To establish your age, you can supply a U.S. birth certificate, religious record like a baptismal certificate, or passport (U.S. or foreign, current or expired). However, to establish your identity, a birth certificate alone will not suffice; you will need a U.S. passport (current or expired) or U.S. state-issued driver’s license or identity card. Alternatively, they will consider an employee identity card, certified copies of medical records, health insurance card, school identity card or records, Medicaid card, or U.S. military identity card. Lastly, to establish your citizenship, a U.S. passport or U.S. birth certificate is recommend. Alternatively, they will accept a Consular Report of Birth, Certificate of Citizenship, or Certificate of Naturalization. Some of these documents can take weeks, if not months, to acquire, so it’s recommended to acquire the documents before applying. Also, if the documents are in a foreign language, you will need to get certified copies before getting an official translation at a local embassy. You will also be required to submit a letter explaining everything. Our firm usually handle this entire process. We draft a cover letter with all documents attached as exhibits in an orderly fashion to make the process as efficient as possible for the local embassy officials.
Temporary Streamlined Identification Number (TSIN)
Now to the grand finale. How do you submit tax returns pursuant to the Streamlined Filing Compliance Procedures without an SSN? Based on extensive discussions with the IRS, our firm prepares a thorough cover letter explaining everything. The first two exhibits are a copy of the Form SS-5 submitted and pending approval and a certified copy of your current or expired U.S. passport. The IRS will then issue what we refer to as a “temporary streamlined identification number” pending approval of the Form SS-5.
Cases filed pursuant to the Streamlined Filing Compliance Procedures may not be filed electronically. Also, payments cannot be made electronically. You must submit the tax returns along with non-willful certification and payment to the following address:
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741
Payments for any tax and interest due must be made by check. On the check, you must include your full legal name, passport number, and the phrase “Streamlined Offshore” and the three tax years being submitted, such as “TYs 2012-2014.”