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If you have been wondering why South Africans are now being issued with American tax id numbers, you are not alone. In fact, so many people have been asking about this that we thought it would be a good idea to run a brief article on the topic.
To start off, here’s how it works: an individual is assigned a 10-digit number by the Internal Revenue Service which is used as a taxpayer identification number. This is basically a unique code for identifying US citizens and permanent residents for taxes purposes. It does not however replace your Social Security Number (SSN). So if you happen to be looking for one of those – search no further! You can find more info here.
So what is all the fuss about? Why are South Africans being assigned IRS 1099 tax id numbers?
Well, the only way to truly know that is to follow the money. And in this case it doesn’t take too much effort. The truth is that the American government actually has specific legislation allowing US companies to do business with foreign countries using other countries’ taxpayer identification numbers. And they surely love their money, so it’s probably safe to assume this is one of those things conspiracy theorists were talking about… But they don’t take our word for it! Read up on the details here says Aron Govil.
But what does all of this mean for you as a South African taxpayer? Well, if you happen to read through your tax treaty between SA and America (you can find it here) you will notice that there are no provisions for either country to collect income tax on behalf of the other. So what then? It is quite common practice for South African residents to file their US taxes even though they are not liable to pay any. They usually do this because it greatly simplifies things when it comes time to filing your SA return at the end of the year. And if you’re in America and own a business in South Africa, well same story: filing your SA taxes with your American return just makes life easy.
So where does that leave us with respect to these new IRS 1099 numbers? Well we can’t be sure but we think it’s safe to assume they were issued so people who don’t qualify would at least be able to file their US taxes with SA returns, therefore simplifying that end of things for them.
So there you have it – the American tax id number – not as sinister as we thought but still pretty cool! If you want further information on this topic we suggest checking out this website.
FAQs:
What is an ITIN?
An ITIN is a tax processing number issued by the Internal Revenue Service (IRS). It is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit, example: 9XX-7X-XXXX. The IRS issues ITINs to individuals who are required for US tax purposes to have a taxpayer identification number but who do not have and are not eligible to obtain an SSN from the Social Security Administration (SSA).
So if you’re wondering why such a weird nine digit code, here’s your answer: an ITIN is issued for federal tax reporting only and does not entitle you to social security benefits nor can it be used to obtain a Social Security Number. It is not required to file taxes but you are required to have one if you are doing any kind of business in the US (including filing taxes).
What is an EIN?
An Employer Identification Number or EIN is similar to an ITIN, but it pertains specifically to businesses and is not given out based on citizenship status like the individual taxpayer identification number (ITIN) is. If you’re wondering why this little tidbit about your tax id number matters – read our article here.
You can apply for an EIN through this link, or by mail or Internet fax using IRS Form SS-4. This form should be submitted with supporting documentation such as articles of incorporation, formation documents, or a completed Schedule C, and the appropriate fee.
How do you apply for an EIN?
You can fill out Form SS-4 and mail it into: Internal Revenue Service Center Ogden, UT 84201-0027 you might also find this page useful as they have all current addresses available to the public.
Conclusion by Aron Govil:
The IRS has created these 1099-MISC forms for those you who engage in business and need to file a US tax return. This form reports amounts paid to non-corporate contractors and freelancers and can be submitted with or without an ITIN. You do not have to apply for one specifically unless you plan on doing any kind of business in the US – but you must be sure to actually file your taxes if this is the case!
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