Why are SSN, ITIN, and my taxes from last year all so important?

There are many different pieces of information you need for filing your taxes, which can be confusing at times. To help this process go smoother for you, we will go over some of the main ones you need but are not sure why.

Social Security Number

Your Social Security number (SSN) is required when you open an account with any sort of financial institution in the United States. This is what makes it so important when filing your taxes. The Internal Revenue Service (IRS) is able to then see any transactions you have made any additional income that you need to report through investments. They are also able to check your credit history and any outstanding loans or mortgages that you are paying interest on. 

Using your SSN, the IRS is able to match what you have reported on your tax return with what your employer and financial institutions have reported. This helps to determine if there are any discrepancies in your filings and eliminate fraud. It also works in your favor by ensuring that you receive the correct amount in tax returns. Additionally, if you are claiming children as dependents on your tax return, you will need to provide their numbers as well as yours. 

Individual Taxpayer Identification Number

The Individual Taxpayer Identification Number (ITIN) is used just like a Social Security number. The difference is that the ITIN is used for individuals who need to pay taxes but do not have an SSN.   If you are required to pay US taxes but are not eligible for an SSN as determined by the Social Security Administration (SSA), then you will need to use an ITIN on your tax forms. 

If any of the following categories (as writing by the IRS) apply to you, then you will need to apply for an ITIN if you do not already have one: 

• Nonresident alien who is required to file a U.S. tax return
• U.S. resident alien who is filing a U.S. tax return
• Dependent or spouse of a U.S. citizen/resident alien
• Dependent or spouse of a nonresident alien visa holder
• Nonresident alien claiming a tax treaty benefit
• Nonresident alien student, professor or researcher filing a U.S. tax return or claiming an exception

To apply for an ITIN, you have a few options. The easiest way to do it is to mail your paperwork and proof of identity to an IRS Operation Center. The mailing address and required information can be found here on the IRS website. You can also call and schedule an appointment for an in-person meeting. This eliminates the need to mail your documents and identification. After applying, you will then receive your number in the mail within seven weeks.

Last Year’s Taxes

The main reason you need your tax returns from last year is to help verify your identity. For example, the IRS will ask for your adjusted gross income (AGI) from last year. This is just another precaution that the IRS takes to make sure everything is done correctly to prevent identity theft, tax fraud, and to make sure you receive the proper return. 

Last year’s tax return also helps when you claim any expenses that carry over between years. This can include things such as depreciation, capital losses, and passive losses from investments. These can help reduce your taxable income and help you receive a larger tax return from the government if you have overpaid.