ITIN Under Exception (h): Getting Your Number Before Your First Tax Return for a US LLC

A common situation for non-resident founders: you have formed a US LLC, you have the EIN, you have a bank account application waiting on a tax ID, and you have a Stripe or Amazon platform asking for your tax information — but you have no US-source income yet, and no 1040-NR to file. You are blocked on an ITIN that the standard W-7 instructions imply requires a tax return to attach.

Exception (h) is the IRS pathway that resolves this. It is documented in the W-7 instructions and in IRS Publication 1915, and it is specifically designed for foreign owners of US LLCs who need to identify themselves to the IRS before they have a personal tax filing obligation.

Why "reason b" doesn't work for new LLC founders

The default ITIN application path uses reason code (b) — non-resident alien filing a US tax return. Under (b), the W-7 must be packaged with a current-year 1040 or 1040-NR. The IRS reviewers expect to see a tax return that creates the filing obligation justifying the ITIN.

For a brand-new US LLC with no operating history, there is often no 1040-NR yet to file:

• The LLC was formed mid-year and has not closed a tax year.
• The LLC has the EIN but no revenue yet.
• The LLC is at the platform-onboarding or bank-account-opening stage, where an ITIN unblocks the next step.
• The foreign owner has no other US-source income outside the LLC.

Filing a W-7 under (b) without an attached return is a near-automatic rejection. So is filing a "placeholder" $0 return that the IRS does not believe represents a genuine filing obligation. The proper path is Exception (h).

What Exception (h) actually is

The W-7 instructions list a set of named exceptions under reason code (h) — Other. Each exception is a specific scenario where the IRS allows an ITIN application without a paired tax return, because the applicant has a recognised, documentable reason to need the ITIN outside the standard filing cycle.

The relevant exception for foreign-owned SMLLC founders is generally Exception 1 (Third-Party Withholding on Passive Income) when the LLC will be on the receiving end of US-source passive payments, or — more commonly used in practice — the broader Exception structure that recognises identifying obligations under specific information-reporting regimes (Form 5472 being the canonical example for SMLLCs).

In day-to-day practice with the IRS ITIN Operation, the path looks like this:

• The W-7 is filed under reason code (h) with a brief tag in the supporting letter referencing the specific Exception.
• The W-7 is not attached to a 1040-NR.
• The W-7 is attached to: EIN confirmation letter (CP 575 or 147C), LLC formation documents, an explanation letter, and (in many cases) initial banking or platform onboarding documentation that shows the practical need.

This is the path that Doola customers, Firstbase customers, Stripe Atlas customers, and direct-formation non-resident founders use most often.

When the (h) path is appropriate, and when it is not

Exception (h) for SMLLCs works when all of the following are true:

• You are a non-resident individual (not a US citizen, not a green-card holder, not a US tax resident).
• You are the sole owner of a US single-member LLC treated as a disregarded entity for federal tax purposes.
• The LLC has a valid EIN (Employer Identification Number).
• The LLC has a genuine business purpose and operations, even if revenue is not yet flowing.
• You need the ITIN for a documentable practical reason — most commonly 5472 identification, banking compliance, platform tax onboarding, or a Form W-8BEN that platforms require with a US TIN.

Exception (h) is not the right path when:

• The LLC has multiple members (file 1065 and apply under reason (b) with the K-1 instead).
• The LLC has already generated income in a tax year that has closed (file the 1040-NR under reason (b) and apply with the return).
• The applicant is a US tax resident (apply for SSN, not ITIN).
• The applicant has separate non-LLC US-source income that creates a personal 1040-NR obligation (use reason (b) with that return).

We confirm which path applies before drafting the W-7. Filing the wrong reason code is the most common refile cause for SMLLC founders trying to handle this themselves.

The explanation letter — what the IRS expects to see

The IRS reviewer assessing an Exception (h) W-7 looks for a short, structured explanation letter. A one-page letter on your or your accountant's letterhead, signed by you, should cover:

1. The LLC's legal name and state of formation. Include the formation date and the entity number assigned by the state.
2. Your role as sole foreign owner. Include your country of residence and tax citizenship.
3. The LLC's EIN. Reference the CP 575 or 147C letter attached.
4. The business purpose and current operations. Two or three sentences describing what the LLC does or will do — e.g., "Amazon FBA sales of consumer electronics", "US-domiciled SaaS billing for international customers", "holding US real estate for rental income".
5. Why an ITIN is needed. Specific and practical — for example: "to identify the foreign owner on Form 5472 due 15 April 2026", "to complete W-8BEN on the LLC's Stripe payout account", "to satisfy the bank's beneficial owner identification requirement under the Corporate Transparency Act".
6. Confirmation that no 1040-NR is required for the current period. A brief statement that the LLC has not yet generated income flowing to the owner, or that the income flow is below the filing threshold for the current period.

The letter does not need to be long. Three or four short paragraphs is the right size. We draft this letter from a template tuned to the LLC's actual circumstances.

The full package, in order

A correctly assembled Exception (h) W-7 package contains, in this order:

1. Form W-7 with reason code (h) ticked and the supporting box for the Exception filled in.
2. The explanation letter described above, signed and dated.
3. EIN confirmation letter for the LLC (CP 575 or 147C from the IRS).
4. Articles of Organization for the LLC (the formation document filed with the state).
5. Operating Agreement (signed by you as sole member).
6. Passport certification — the Certificate of Accuracy from a CAA, with the certified passport copy attached. The original passport stays with you.
7. Practical-need evidence — for example, a Stripe or Amazon onboarding screenshot requesting a US TIN, a bank account application showing the LLC's name with the TIN field pending, an upcoming 5472 deadline notice.
8. Cover letter to the IRS ITIN Operation referencing the Exception (h) basis and listing the enclosed documents.

This package goes to the IRS ITIN Operation in Austin, Texas, by tracked mail. We handle the assembly and dispatch.

Timeline and what to expect

Once the package arrives at the IRS, processing follows the same queue as standard W-7 applications:

• 7–11 weeks typical, from receipt to CP565 issuance.
• Up to 14 weeks during the January–April peak season.
• Refile-to-issue timing if the first attempt is rejected: another 7–11 weeks on top of the initial wait.

Preparation under the Standard package typically takes 3–7 business days; under Priority, 1–3 business days, including expedited CAA verification scheduling.

A note on Exception (h) specifically: the IRS reviewers handling these cases are usually familiar with the SMLLC pattern, and well-prepared packages move through cleanly. The most common cause of delay is an underdeveloped explanation letter — one that does not clearly tie the LLC's existence to a genuine identifying need for the foreign owner.

After the ITIN — the year-one filing cycle

Receiving the ITIN is the procedural milestone. The substantive obligations begin or continue around it:

• Form 5472 is due annually for foreign-owned single-member US LLCs, with a pro forma Form 1120 attached. Deadline: 15th of the fourth month after the LLC's tax year end. Penalty for non-filing: US$25,000 per LLC per year.
• Form 1040-NR becomes due in any year the LLC engages in a US trade or business or has US-source income flowing to the foreign owner.
• State filing may also apply depending on the state of formation. Delaware requires an annual franchise tax and report; Wyoming requires an annual report; California has gross-receipts based filings even for foreign owners with minimal activity.
• Beneficial Ownership Information (BOI) reporting to FinCEN was paused in early 2025 for many filers but its current status should be reviewed annually — the rules are in active change.

A standard Exception (h) ITIN application addresses the identification piece. Ongoing compliance is a separate workstream that should be planned alongside the application, not after it.

Edge cases we see frequently

• Multi-state LLCs. A Wyoming LLC operating through a Delaware-registered subsidiary, or vice versa. The owner's ITIN application is the same — based on the top-level LLC's documents — but the supporting structure documentation may grow.
• LLC owned by a foreign trust or holding company. Different rules. The "owner" for IRS purposes may be the foreign entity rather than the individual, in which case the entity needs an EIN and the ITIN may not apply to the individual.
• LLC with a pending S-corp or C-corp election. Filing Form 8832 or 2553 changes the federal classification, which may move the application off the Exception (h) path and onto a reason (b) path with a corporate return. We screen for this.
• LLC that bought US real estate via Exception 1(a). Real estate ownership through an SMLLC sometimes interacts with FIRPTA at sale — the ITIN application can be filed under (h) at formation but a future sale may require a separate 8288-B-driven path.

Frequently asked questions

The FAQ block above covers the most common scenarios. If your structure has additional layers — multi-tier ownership, foreign trusts, real estate, multiple US LLCs — book an eligibility review and we will map the application path before you spend on any service.