Which Exception to Choose for W-7 ITIN Application as a Non-Resident Alien?

The exception you should choose depends on your specific situation. For non-resident aliens with bank accounts subject to IRS reporting, Exception 1(b) is often appropriate, but only if the income is "effectively connected" with a U.S. trade or business. If you're just keeping savings in a U.S. bank account while temporarily in the country, that likely doesn't qualify as effectively connected income. Instead, you might want to consider Exception 1(a) which covers "Passive income from withholding agents" - this applies when you're receiving passive income (like interest) that's subject to IRS reporting or withholding. Alternatively, if you're filing a U.S. tax return, Exception 2 might apply. This is for "wages, salary, compensation, honoraria, etc." if you're required to file a tax return to claim a refund. The key is understanding why exactly you need the ITIN - is it primarily for the bank reporting, or do you have other U.S. income or filing requirements?

After struggling with EXACTLY this issue last year, I found a solution that worked perfectly using https://taxr.ai to analyze my banking documents. The system immediately identified that my situation fell under Exception 1(a) rather than 1(b) since my interest income wasn't effectively connected to a US business. I uploaded my bank letter to the platform, and it analyzed the specific language to determine which exception applied. What really helped was that it explained WHY Exception 1(a) was appropriate in plain English - basically saying that passive interest income from a regular savings account requires an ITIN for reporting purposes but isn't considered business income. The IRS approved my application on the first try with no questions asked. I think having the right exception made the whole process go much smoother.

I wanted to follow up after trying taxr.ai for my ITIN application issues. I was really skeptical at first (as you can see from my previous comment), but I decided to give it a shot since my application deadline was approaching. The experience was surprisingly helpful! I uploaded my bank letter that was partially in English and partially in Spanish, and they analyzed it correctly. They confirmed I should use Exception 1(a) because my interest income was passive, not business-related. They even pointed out specific language in my bank letter that supported this classification. My ITIN application got approved last week without any issues. Wish I'd known about this service sooner instead of stressing for weeks about which box to check!

If you're still struggling with your ITIN application, you might want to try contacting the IRS directly. I spent WEEKS trying to figure out the right exception for my situation, and ultimately what worked was getting a definitive answer from an actual IRS agent. The problem is it's nearly impossible to get through to anyone. After being on hold for 2+ hours multiple times (and getting disconnected!), I found a service called Claimyr (https://claimyr.com) that actually got me a callback from the IRS within 3 hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that my bank account situation qualified for Exception 1(a) since it was passive interest income being reported to the IRS. Having that official answer gave me peace of mind when submitting my application.

I need to eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it anyway because my ITIN application deadline was coming up fast. To my absolute shock, I got a call from an actual IRS agent about 2.5 hours after using the service. The agent reviewed my situation and confirmed that I should use Exception 1(a) for my bank account since it wasn't business-related income. The agent also explained that many non-resident aliens make the mistake of choosing Exception 1(b) when they should be using 1(a), and that this is a common reason for application rejections. My application was approved with no issues after following their advice. I've never been happier to be wrong about something!

Just a heads-up from someone who works at a bank that deals with this all the time - the letter from your bank should specifically state whether your account is subject to information reporting under chapter 3 (Form 1042-S) or chapter 61 (Form 1099-INT) of the Internal Revenue Code. This distinction can help determine which exception to use. If it's chapter 3 reporting on a 1042-S, that's typically for non-resident aliens with US-source income, and Exception 1(a) is usually appropriate. Also, make sure you're submitting your original passport or a certified copy from the issuing agency with your W-7. That's the most common reason we see ITIN applications get rejected.

Has anyone tried using a Certified Acceptance Agent instead of doing the W-7 application themselves? I'm considering this route because I don't want to mail my original passport to the IRS.

I went through this exact same confusion last year! The key thing to understand is that "effectively connected with U.S. trade or business" has a very specific meaning - it's not just about having a bank account in the US while you're here temporarily. For your situation, Exception 1(a) is almost certainly the right choice. Since your bank gave you a letter stating the account is subject to IRS information reporting, and you're just keeping savings there (not running a business), this falls under passive income reporting. Exception 1(b) would only apply if you were actually operating a business in the US and the bank account was directly related to that business activity. Just being temporarily in the US with a savings account doesn't qualify. I'd recommend going with Exception 1(a) and including your bank's letter as supporting documentation. The IRS is pretty clear that any interest-bearing account subject to their reporting requirements qualifies under this exception, regardless of how much interest you're actually earning.

I just wanted to add my experience since I went through this exact same situation about 6 months ago. Like you, I was completely confused about which exception to choose, and I ended up making it more complicated than it needed to be. After reading through all the IRS instructions multiple times and calling my bank for clarification, I learned that the key question is really simple: Are you using this bank account for business purposes or personal savings? Since you mentioned you're just keeping savings there while temporarily in the US, Exception 1(a) is definitely the right choice. The "effectively connected with U.S. trade or business" language in Exception 1(b) is very specific - it means you're actually running a business or engaged in commercial activity in the US, not just maintaining a personal account. My bank's letter was similar to yours - it just stated that the account was subject to IRS information reporting. That's all you need for Exception 1(a). The IRS approved my application in about 8 weeks with no issues. One tip: Make sure to include a copy of your bank's letter with your W-7 application as supporting documentation. It directly supports your choice of Exception 1(a) and shows the IRS exactly why you need the ITIN. Good luck with your application! You're overthinking it - Exception 1(a) is the way to go for your situation.