ITIN for U.S. Bank Interest: How to Reclaim Backup Withholding (1099-INT)

If you're a nonresident alien with a U.S. bank account and you received a Form 1099-INT showing federal income tax withheld, your bank applied backup withholding — and you may be entitled to a full refund.

Getting that refund requires two things: an ITIN and a filed Form 1040-NR. This guide explains the process from start to finish.

Why Banks Withhold on Interest Paid to Nonresidents

Nonresident aliens who receive U.S.-source income are generally subject to withholding. For bank interest, the standard backup withholding rate is 24% if the account holder hasn't provided a valid taxpayer identification number (TIN).

Under normal circumstances, a nonresident alien who provides Form W-8BEN to the bank is exempt from backup withholding on most bank interest — because nonresident aliens are typically not subject to U.S. tax on portfolio interest from bank deposits. But this exemption only works if you provided W-8BEN with a TIN, or if the bank processed your account correctly as a foreign account.

Banks sometimes apply backup withholding when:

• The account was opened without a W-8BEN on file
• The TIN on the W-8BEN was blank or incorrect
• The account type changed and the exemption wasn't updated
• The bank's records classify you as a U.S. person in error

The result: tax withheld that you legally don't owe.

Can You Reclaim It?

Yes. Backup withholding applied incorrectly to a nonresident alien's bank interest is refundable by filing Form 1040-NR (U.S. Nonresident Alien Income Tax Return) and claiming a credit for the withheld amount.

To file Form 1040-NR, you need a TIN. Since nonresident aliens can't obtain an SSN, you need an ITIN.

Getting the ITIN: Which Exception Applies

Nonresident aliens seeking an ITIN specifically to address U.S. bank interest use W-7 Exception 1(b): Interest-bearing accounts at U.S. financial institutions.

This exception allows you to apply for an ITIN without attaching a tax return. The supporting documentation proves you have an account generating reportable interest at a U.S. institution.

Documents required for Exception 1(b):

• Form 1099-INT from the bank (or a letter from the bank confirming the account, interest paid, and withholding applied)
• Identity documentation (passport — original, or certified copy via CAA)
• Form W-7 with Reason h checked and "Exception 1(b)" written in the exception line

Practical note: Banks issue 1099-INT for calendar years (January 31 deadline for prior year). If you're applying before receiving the current year's 1099-INT, use the prior year's form or request a letter from the bank directly.

Step-by-Step Process

Step 1: Obtain the Form 1099-INT

Contact your bank and request Form 1099-INT for the relevant tax year(s). If multiple years had withholding, you can apply for the ITIN once and then file multiple years of 1040-NR returns.

Step 2: Apply for an ITIN Using Exception 1(b)

Submit Form W-7 with:

• Exception 1(b) declared (Reason h checked, description filled in)
• The 1099-INT or bank letter attached
• Passport verified by a CAA (so you don't mail the original)

Processing time: 7–11 weeks.

Step 3: File Form 1040-NR Once You Have the ITIN

After receiving your ITIN (via CP565 notice), file Form 1040-NR for each tax year where withholding was applied. On the return:

• Report the interest income in the appropriate section for U.S.-source income
• Claim the withheld amount as a tax credit (federal income tax withheld)
• If the result is an overpayment, the IRS issues a refund

Which lines to use on 1040-NR: Interest income from U.S. sources goes on Schedule NEC (Tax on Income Not Effectively Connected With a U.S. Trade or Business). Portfolio interest paid to nonresident aliens by U.S. banks is generally exempt from U.S. tax — so the rate is 0%, and the entire withheld amount becomes a refundable credit.

Step 4: Receive Your Refund

The IRS issues refunds by check (mailed to the address on the return) or by direct deposit to a U.S. bank account. For nonresidents without a U.S. account, the check is the standard option. Allow 3–6 months for refund processing after the return is filed.

How Far Back Can You File?

The IRS refund statute of limitations is 3 years from the original filing due date. For a nonresident alien who wasn't required to file (because all income was subject to withholding at the source), the 3-year clock runs from the due date of the original return.

Example: For tax year 2022, the 1040-NR was due June 15, 2023. The deadline to claim a refund for 2022 is June 15, 2026.

This means:

• 2022 withholding: recoverable until approximately June 2026
• 2023 withholding: recoverable until approximately June 2027
• 2024 withholding: recoverable until approximately June 2028

If multiple years are involved, file separate 1040-NR returns for each year. You only need one ITIN — it applies to all years.

What About Treaty Benefits?

Many countries have U.S. tax treaties that reduce or eliminate the withholding rate on certain types of income. For portfolio interest from bank deposits, most treaties exempt it entirely (the U.S. domestic rate for nonresidents on bank deposit interest is also 0% under Internal Revenue Code §871(i)).

The practical result: in most cases, the full backup withholding amount is refundable because the correct U.S. tax rate on nonresident bank deposit interest is zero — regardless of whether your country has a treaty.

Check IRS Publication 515 (Withholding of Tax on Nonresident Aliens and Foreign Entities) and the applicable treaty for confirmation.

After the ITIN: Preventing Future Withholding

Once you have your ITIN, submit Form W-8BEN to your bank with your ITIN filled in. This:

• Certifies your nonresident status
• Provides the TIN the bank needs for its records
• Stops backup withholding from being applied to your account going forward

Update W-8BEN with all U.S. banks and financial institutions where you hold accounts. The form is valid for 3 years and must be renewed when it expires.

Need help with the ITIN application or 1040-NR filing? [Contact us](/apply) — we assist nonresident aliens with the full process remotely.