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The IRS declares in many documents that:

"ITINs are IRS assigned numbers issued only for federal tax administration purposes"

and

"ITINS do NOT Serve as identification outside the federal tax system".

However, FTB disallows Dependent Exemption Credit if the dependents do not provide SSN or ITIN. Only if you are Canadian or Mexican resident then you can use Form 3568.

Question1: Is FTB, by requiring ITINs for Sate Tax purposes, not in breach of the IRS rules that ITINS be used only for Fed Tax purposes? If yes, why is this legal?

Now I am neither Mexican nor Canadian (yes, we do exist) and I have just received a notice from FTB that they have disallowed my dependent exemption credits due to missing ITINs or SSNs. As non-resident aliens with no work authorization, my dependents are not eligible for an SSN. They have applied for an ITIN twice but were rejected with the explanation that (since non-resident aliens are not allowed to have a family for fed tax purposes!) ITIN is only for Fed Tax purposes and they are not going to need them.

Question2: What would be a realistic way out of this enforced logical contradiction? What can we do to claim dependent exemption credit?

Thank you.

Disclaimer: I am not a tax professional but only a very unlucky non-resident alien (visiting professor) who is being milked by tax authorities on every occasion.

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  • For years, SS regulation has been that the SSN must not be used as a general identification number. But guess what? Everybody uses it as a general identification number. Same with ITIN. Bottom line: accept this reality and give the FTB your ITIN. – RonJohn Feb 17 at 23:27
  • I am now content with the notion that accepting absurd is a standard here. And I would love to give the FTB my ITIN. But you may be missing that part of my question where I say that I do NOT have an ITIN. IRS wouldn't give it, you see? – Poor Professor Feb 18 at 1:03
  • Then I guess you aren't getting CA exemption credits. What did the FTB say about what the IRS said? – RonJohn Feb 18 at 1:11
  • They just said "We can't answer for IRS. They are responsible for issuing ITINs." which is equivalent to "I don't care". I am telling IRS "I do need ITIN for state tax purposes" and they are telling me "no, you don't". I am saying "look, they require it" and they are saying "they shouldn't". If they shouldn't why wouldn't you sue them? Is there a law here or does everyone do what they want? – Poor Professor Feb 18 at 2:40
  • "If they shouldn't why wouldn't you sue them?" Well, I would not sue them because I don't have standing (that rule is not hurting me). OTOH, you can sue the CA FTB!!! – RonJohn Feb 18 at 3:13
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So the eligibility language for the CA EITC Dependent credit requires an SSN or ITIN:

https://www.ftb.ca.gov/file/personal/credits/california-earned-income-tax-credit.html

  • You must:

    • Have taxable earned income
    • Have a valid social security number or individual taxpayer identification number (ITIN) for you, your spouse, and any qualifying children
    • Not use “married/RDP filing separate” if married
    • Live in California for more than half the year

So to be eligible for the credit you and the applicable child must have an SSN or ITIN.

It probably goes without saying that I'm just a stranger on the internet and don't know anything and you should talk to a tax professional, but I suspect there's no point to claiming the FTB is somehow illegally using the ITIN.

On the IRS page related to the ITIN, immediately after the part you quoted, the IRS expands:

  • An ITIN does not:

    • Authorize work in the U.S.
    • Provide eligibility for Social Security benefits
    • Qualify a dependent for Earned Income Tax Credit Purposes

So the IRS is saying the ITIN is only for tax tracking and doesn't authorize any other thing; it's not saying it's illegal for anyone to ever request or use your ITIN. Sort of like the way my drivers license says something like "this doesn't establish eligibility to work or vote." But again, talk to a tax person, not a stranger on the internet.

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  • "there's no point to claiming the FTB is somehow illegally using the ITIN". I think there is no point in claiming anything since no-one is going to listen anyway. If you have noticed, what you wrote above implies that the IRS was wrong in claiming that we should not receive ITINs because we should not need them beyond Fed Tax. "talk to a tax person, not a stranger on the internet" So you recommend closing down SE, right? Here we ask questions to strangers on the internet all the time. – Poor Professor Feb 18 at 5:49
  • What a useless waste of time is it trying to find sense in a space where making sense is not a priority. I want to be your government. I will illegally milk my citizens, but in measure, say, $1K each so that it isn't worth hiring a lawyer to sue me. 100m citizens x $1K = $100b, not bad. Especially if they don't complain. Of course, go see a taxman who will take $100 just to say "no, you can't". Some of my friends have taken the government to the court because they have been milked $10K+, and they have won! Because the government was wrong. So yes, milking $1K is smart. – Poor Professor Feb 18 at 6:07
  • I'm saying you should talk to a tax professional because I'm just giving you my opinion on the text and someone who sits with you and goes over your whole financial situation can give better more pointed advice; really not much different than the disclaimer you put in your question.... I'm by no means saying the government is alway right or justified. – quid Feb 18 at 7:05
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Is FTB, by requiring ITINs for Sate Tax purposes, not in breach of the IRS rules that ITINS be used only for Fed Tax purposes?

None of your quotes say that ITINs be "used" only for federal tax purposes. You only have a quote that says ITINs are "issued" only for federal tax purposes. Something can be issued for one purpose and be used for another. I see no contradiction here.

The IRS won't issue you an ITIN if you don't need it for federal tax purposes, and only want it for some other purpose. But once you got an ITIN for filing a federal tax return, I see nothing that says you cannot use it elsewhere. And I see nothing that says state governments or other organizations cannot provide you a benefit for having an ITIN.

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