An ITIN is a nine-digit number beginning with the number ‘9′, has a range of numbers from ‘70′ to ‘88′ for the fourth and fifth digits. (i.e. 9XX-7X-XXXX)

Who needs an ITIN?

Individual Taxpayer Identification Numbers were created for foreign investors and visitors who owe taxes but are not eligible for a Social Security Number (SSN). ITINs have recently been the subject of much scrutiny as a large number of undocumented aliens were able to obtain Individual Taxpayer Identification Numbers. ITINs enable undocumented immigrants to legally file taxes in the United States, even if they lack the appropriate immigration status. ITINs are issued to persons that are unable to obtain a valid United States Social Security number. If a person is eligible to obtain a social security number, the IRS will not issue an ITIN unless it can be documented that the Social Security Administration denied a request for a social security number. Individuals needing an ITIN include:

1. A nonresident alien individual eligible to obtain the benefits of a reduced rate of withholding under an income tax treaty

2. A nonresident alien required to file a U.S. tax return or filing a U.S. tax return only to claim a refund

3. A nonresident alien electing to file a joint tax return with a spouse who is a U.S. citizen or resident alien

4. An alien individual claimed as a spouse for an exemption on a U.S. tax return

5. An alien individual claimed as a dependent on another person’s U.S. tax return (must prove that the dependent is a resident in the United States, Mexico or Canada)

6. A nonresident alien student, professor, or researcher filing a U.S. tax return or claiming an exception to the tax return filing requirement, or

7. A party to a foreign person’s disposition of U.S. real property interest.

Obtaining an ITIN

You must file Form W-7, Application for Individual Taxpayer Identification Number, to apply for an ITIN, and show that you have a federal tax purpose for seeking the ITIN. Along with the completed Form W-7, you will submit identity documents, and either a federal tax return, or other documentation to show the federal tax purpose for which you need the ITIN.

ITIN v. SSN

If an ITIN holder later becomes eligible for and receives a valid social security number (SSN), he or she must notify the IRS ITIN unit in writing of the valid social security number. The social security number will become the primary number for IRS purposes and must be used for all future filing purposes. The IRS will void out the ITIN and all prior tax information under the ITIN will be associated with the new social security number.

Running a business is not simple and if you are just starting, managing the cash flow will undoubtedly be a problem. Taxes at this stage are a big issue and thus it is important to know whether you are eligible for tax relief in order to reduce the tax pressure that your business is suffering. Latest reforms have helped small businesses obtain some relief. Let’s analyze how.

There are several aspects of tax legislation that provide relief for small businesses. The following categories include reductions and aid for small businesses: returns on income tax, reductions of taxes on dividends, reductions of taxes on capital gains and also, tax incentives to promote small businesses growth. All these aspects when combined provide a significant relief for tax payers that run a small business.

Returns On Income Tax

The government has provided relief on income tax returns for small businesses by widening the number of things that are included in the smaller tax categories (10% and 15%). Thus, the business income can be mainly taxed at lower categories while the rest of the categories up to 35% where also reduced by a few points. This way, small businesses can reduce the amount of money destined to income tax returns and employ those amounts for further funding the business.

Elimination Of Death Tax

The death tax usually implied that upon the death of a business owner, when the property of the business assets and management was passed on to the family members who inherited, a percentage of the value of those assets had to be paid by the beneficiaries. This tax has been eliminated and will not be reinstated until 2011 if reinstated at all.

Taxes On Dividends And Capital Gains

One of the main problem with taxes and businesses is double taxation. When the business pays taxes, it does not make sense that the individuals who own the company pay taxes too for the same concepts. However, such situations occur frequently. Nevertheless, recent changes on regulations through taxes on dividends and capital gains relief have provided a great improvement on the problems that double taxation generate.

Tax Incentives For Promoting Small Business Growth

Lately, further changes on small business tax regulations have provided more ease to company’s budgets by offering tax incentives to promote small business growth. For instance, businesses need to pay according to the assets they posses but business assets tend to loose value at a greater pace. Recognizing this fact, new regulations increased the depreciation rates for new assets in the first year by an additional 20% thus providing a reduction on the base amount where taxes are originated.

Summing Up

As you can see, there are many tax relief options for small businesses. It is a wise idea to hire a financial consultant (if you do not have one already). Accountants and lawyers specialized in taxes can provide you with all the tools you need to reduce the amount of money you pay on taxes and thus give you the opportunity to further boost your business gains.

Filing bankruptcy is obviously not something most people want to do. Given the current economic times, however, it goes without saying that many people simply do not have much of a choice. If you are considering it, learn a lesson from the tax implications of the recent Nortel bankruptcy filing.

Nortel Networks is one of the largest communications makers in North American and, indeed, the world. How big? Well, it had both assets and debts of nearly 11 billion dollars when it recently filed bankruptcy. Why file bankruptcy if the ledger looked nearly balanced? The answer is found in debt repayment obligations coming due the company simply could not meet.

Why should you care about the bankruptcy of Nortel Networks? Well, you don’t really have to, but you should take into account something that happened from a tax perspective. Specifically, the IRS filed a claim for unpaid taxes with the Bankruptcy Court handling the matter. The amount of the unpaid taxes? A staggering three billion dollars. Making matters all the more interesting, it seems as though the powers that be at Nortel did not realize taxes would be an issue before making the bankruptcy filing.

So, what is the lesson? The issue at hand is how debt is treated in our archaic and odd tax code. It is treated as debt unless it is forgiven. At that point, it converts to income under the tax code. You know what that means. Yes, you owe taxes on that income! Let’s look at an example.

I started a business during the boom times earlier this decade. I sold an app for iPhones that shot a flame out the end so bank and stock market executives could light $100 bills to light their cigars. Business was so brisk that I ordered $1 million dollars of the product from China and financed it with a loan from a bank. Well, the economy blew up in 2008 and so did my business. I filed for bankruptcy protection and asked the court to eliminate the $1 million dollar loan debt. The court agrees, but here comes the IRS. They view that relief as income. What does that mean? It means I owe income tax on the million dollars!

This is obviously an extreme example, but it does highlight the fact tax issues need to be considered when filing bankruptcy. In getting rid of debt, you might end up with a tax problem..

In the United States if you receive property from a relative in their will and that property is worth more than $3. 5 million as of his year you will have to pay estate tax. You may be asking what is the estate tax, and in short it is a tax that you will have to pay on property you are set to receive. Both the property tax and the estate tax are considered the least popular forms of taxation in our tax code.

Sometimes people will unfortunately have to sell so much of the estate or sell it in full to be able to pay the estate tax, which will mean that a home that has been in the family for many years can no longer be and the remaining money will have to go on something else.

There is an amount each year to which any property inheritance is exempt from tax payment which in 2006 was $2 million, however if you have a wife or husband then the amount you are exempt will double so this will mean that a single person would only pay tax on amounts over $2 million, but a married couple would only have to pay tax on any estate or remaining equity after $4 million.

The estate tax is due to be paid 9 months after the person dies and is payable by the recipient. You will have the option to extend the period of time it is paid over if the estate has a business attached to it, which will mean you will be able to keep the business going as well as being able to meet the tax payments, the period can be extended up to 15 years.

If you own land such as a farm, you can get a discount further, which will mean that a quarter or half of the amount of the farm value is not taxed as long as it is being or has been looked after by a family member and you will also have to keep the farm within your family for a minimum of 10 years before selling on to receive this exemption.

You will find that roughly only 1% of the population will recieve a gift such as this from a loved one who has passed away, and without property of such equity you will not have to worry about estate tax.