AICPA Faults IRS’s New ITIN Application Process

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. 

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.”