The American Institute of CPAs has written a letter to Internal Revenue Service Commission Doug Shulman saying that new interim about how taxpayers must apply for Individual Taxpayer Identification Numbers for 2011 returns are burdensome and may prevent some taxpayers from getting the documentation they need to qualify for an ITIN.
Patricia Thompson
Individuals who are not eligible for a Social Security number must have an ITIN in order to meet their U.S. tax filing obligations and claim refunds. The AICPA urged the IRS to review its decision to not accept notarized copies of identification documents, such as passports, and to issue guidance about how taxpayers who need ITINs can comply with their 2011 federal tax obligations.
The IRS toughened the rules in June for applying for ITINs through the end of the year in response to reports of tax credit abuse by illegal workers (see IRS Toughens ITIN Application Requirements).
A report last year from the Treasury Inspector General for Tax Administration found that individuals who are not authorized to work in the United States were paid $4.2 billion in refundable tax credits such as the Additional Child Tax Credit in 2010 because they were able to file tax returns using an ITIN (see Illegal Workers Got $4.2 Billion in Tax Credits). The crackdown also apparently came in response to complaints from some IRS employees that their supervisors were encouraging them to ignore signs of suspected fraud in the ITIN applications they were supposed to review. A different report from TIGTA this month substantiated those allegations (see IRS Discouraged Employees from Identifying Fraudulent ITIN Applications).
However, the AICPA believes the new procedures may prove to be impractical for many taxpayers. In a letter Wednesday to IRS Commissioner Shulman, AICPA Tax Executive Committee chair Patricia Thompson wrote, “We request immediate guidance regarding how taxpayers who are unable to obtain ITINs under the interim changes should achieve compliance with their 2011 federal tax obligations. This issue is particularly urgent as individual income tax returns on extension are due by Oct. 15, 2012.”
She explained that the difficulties for taxpayers arise primarily because the changes require taxpayers, as of June 22, 2012, to mail original documents to the IRS, such as their passports or other appropriate identification documents, which the IRS says it could take up to 60 days to return. Taxpayers may also submit a copy of the document that has been certified by the foreign issuing agency, but some governments do not offer certified documents.
“It is impractical for most foreign persons in need of an ITIN to surrender their original identification documents to the IRS for 60 days,” the AICPA noted. “We have also heard from our members that some prospective ITIN applicants who are currently residing in the United States have been advised by their home country’s consulate that it does not issue certified copies of passports.”
In the letter the Institute noted, “We think notarized documents are an efficient method of transmitting required documentation to the IRS in the majority of cases.”
5 Comments
The IRS would have never made it this far with this type of requirement if it were something that US citizens were applying for--none of us would have stood for that, and the idea would suddenly seem preposterous if that one factor were changed. What they didn't prvode any consideration for, however, is that if a US citizen were married to a foriegn national that does not have a SSN, the US citizen would suffer the consequences of this change as well. In order to file a tax return, individuals who are married, whether filing jointly or separately, a required to provide their spouse's SSN (or ITIN) on their return. This applies regardless of whether or not the spouse had any income. If the spouse does not yet have an ITIN, the couple's tax return must be submitted along with form W-7 (and original documents proving the spouse's identity and nationality) to apply for one.
My husband is from another country, and does not yet have authorization to work in the US, so he had no income for the 2011 tax year. I had the terrible luck or having to apply for an extension for 2011, and finally being ready to file in July, after the changes went into effect. I AM NOT sending the IRS his birth certificate or voter's registration card to hold onto for two months (or lose-their previous stance on sending original documents was that they did not recommend it). I have looked into what is required to replace these documents, and I would have to be crazy to risk sending a document that cannot be replaced from the US, or not being able to prove his identity to anyone else for 60 days (plus the several months it would take to replace his birth certificate). It is almost October and I have yet to see any of my $3,000 tax refund. I looked into the option of getting him a passport at our local consulate, and perhaps I could afford that if I had my tax refund.
CAPATRIOT--while there are other purposes besides filing a tax return that would make someone eligible to apply for an ITIN, the process remains the same. You must file W-7 application, along with supporting documents--which must be originals, and they will be kept by the IRS for up to 60 days. There are exceptions to the requirement of including your tax return, but not the requirement of providing original/certified proof of identity.
Posted by: mcano | September 28, 2012 11:53 AM
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filing a return is NOT the only way to get an ITIN. help your clients better by studying the options available.
Posted by: CAPATRIOT | September 5, 2012 3:06 PM
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The IRS issuing an ITIN number does not cause fraud. Other acts of individuals do, including defrauding the IRS.
Identification numbers were virtually invented by the IRS so that they can do business with people. If they don't issue the number they have no alternative system. No one can represent the legitimate person because they have no number. The IRS becomes completely dysfunctional for legitimate activities, including placing a $13 million project on hold, keeping 110 workers unemployed, requiring US Senator to weigh in to get this one little number.
The IRS needs to protect itself, but the issuance of ITIN must be a separate process.
Posted by: Larry the Accountant | September 5, 2012 6:51 AM
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I do agree with technocpa, I also have Canadian, German, and south American clients that are purchasing rental properties in the USA and as a Certifying Register Agent I was able to obtain the ITIN's for my foreign clients, the ones that investing in our depress real estate market and hopefully help our economy . As a CPA, CMA and EA I certainly not interested on committing fraud by obtaining fraudulent ITIN's for my clients. The issue with the erroneous tax refund given to illegal alien must be address by the IRS and I know by fact that none of those tax return were prepared by a license accountant since most of the accountants that I know hold two or more degree from accredit universities, that usually translate to a lot of years studying accounting, taxes and law, for this reason I would encourage the IRS to allowed or profession to continue to facilitate the ITIN process, if not I have 10 years of W7 documentation that I will love to drop at our local IRS center.
Posted by: aglorsky | September 4, 2012 1:24 PM
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Also, the ITIN process is backwards! In order to open a bank account or other cases where a tax identification number is needed long before filing a tax return, the ITIN is not available. I have Canadians buying rental property in the US and the withholding on the rental income gets held up waiting for the ITIN, that can't be obtained until an income tax return is filed. If the problem is issuing erroneous refunds, then the IRS should focus on that and make the ITIN process work in forward order and with less hassle.
Posted by: technocpa | August 31, 2012 8:32 AM
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