The Internal Revenue Service is making some important changes in the Individual Taxpayer Identification Number program that will require many ITIN holders to renew their numbers under a law passed by Congress last December.
The IRS plans to begin the renewals in October. The Protecting Americans from Tax Hikes Act, also known as the PATH Act, requires ITINs that have not been used on a federal tax return at least once in the last three years to be renewed. Otherwise they will no longer be valid for use on a tax return unless the taxpayer renews it. ITINs are frequently used by foreign nationals, resident aliens and undocumented workers.
ITINs issued by the IRS before 2013 that have been used on a federal tax return in the past three years will need to be renewed starting this fall. The IRS is putting in place a rolling schedule for the renewals to help taxpayers.
The first ITINs that will expire under the schedule are those with middle digits of 78 and 79 (Example: 9XX-78-XXXX). The renewal period for these ITINs begins October 1, 2016. The IRS will mail letters to this group of taxpayers starting in August to tell them they need to renew their ITINs if they need to file a tax return and explain steps they need to take. The IRS plans to announce the schedule for expiration and renewal of ITINs that do not have middle digits of 78 and 79.
The IRS pointed out that if taxpayers have an expired ITIN and they don’t renew before filing a tax return next year, their tax refunds could be delayed and they might be ineligible for claiming certain tax credits, such as the Child Tax Credit and the American Opportunity Tax Credit, until they renew their ITIN.
“The ITIN program plays an important role in our tax system,” said Debra Holland, commissioner of the IRS’s Wage and Investment Division, during a conference call with reporters Thursday. “It’s critical to helping millions of people meet their U.S. tax obligations. ITINs are used by those who have tax filing or payment obligations under U.S. law but don’t have a Social Security Number. That includes people such as foreign nationals and resident aliens.”
The IRS issued legal guidance in Notice 2016-48 explaining how the agency will implement the changes to the ITIN program in accordance with the PATH Act.
Holland emphasized the IRS is doing all it can to make the ITIN renewal process as simple and straightforward as possible. “We want to make sure ITIN holders are ready for these changes,” she said. “We’re committed to raising awareness about the new ITIN rules. We’re working closely with our partners in the tax community, and with outreach groups, to share information about ITINs. In the weeks ahead, we will be adding more information and material about the renewal process on our special ITIN page on IRS.gov.”
The changes apply to two groups of ITIN holders:
“The first group encompasses people who haven’t used their ITINs on a federal tax return at all in the last three years,” said Holland. “That means they haven’t been used on a tax return in 2013, 2014 or 2015. If you’re in this group, your ITIN expires at the end of 2016. The renewal period for this group begins October 1, less than two months from now. But you only need to renew if you plan to file a 2016 tax return next year.”
The other affected group is those people who have an ITIN issued before 2013, whose numbers begin expiring at the end of this year. These ITIN numbers will be renewed on a rolling basis, with the first group starting on October 1, Holland noted.
“The first ITIN holders up for renewal in this group will be people who have ITINs with middle digits of 78 or 79,” she said. “In the next couple of weeks, the IRS will begin mailing letters to these taxpayers explaining what they need to do to get their ITINs renewed. We expect to mail about 400,000 letters in the next few weeks.”
The IRS website, IRS.gov, explains the guidelines in both English and Spanish, and the IRS plans to add more information in other languages in the next few weeks.
“We don’t need people to renew their ITINs at this time unless they’re in one of these two specific groups we mentioned,” said Holland. “However, if you have an ITIN that’s going to expire soon, it’s important not to delay. You need to have a current ITIN in order to file your federal tax return in 2017. So it’s better to do it this fall rather than wait for tax time next year.”
Taxpayers who are in one of the two groups only need to renew their ITINs if they expect to file a tax return next year, Holland emphasized. “If you don’t need to file a tax return, you don’t need to take any action,” she added.
To renew an ITIN, taxpayers need to complete a Form W-7, Application for IRS Individual Taxpayer Identification Number, following the instructions and including all the required information and documentation.
“There’s one important exception to those procedures,” Holland cautioned. “To help reduce burden and make this easier on taxpayers, we’re waiving the requirement to attach a tax return to the W-7.”
There are three options for submitting the W-7 application package to the IRS, she noted:
• Mail it in
• Use one of the many IRS authorized Acceptance Agents or Certified Acceptance Agents around the country; or
• Deliver it in person by calling ahead and making an appointment at one of the IRS’s Taxpayer Assistance Centers.
To reduce the paperwork burden on households where several people will need to renew their ITIN, the IRS has created what it calls the “family option.”
“Here’s how it works,” said Holland. “If any individual having an ITIN with a middle digit of 78 or 79 receives a renewal letter from the IRS, they can choose to renew the ITINs of all of their family members at the same time starting Oct. 1. This help them avoids the hassle of doing these separately over several years. Family members include the tax filer, the filer’s spouse and any dependents claimed on their tax return.”
The new requirements are unrelated to the problem the IRS had several years ago where managers ordered employees to avoid challenging the authenticity of foreign documents used to apply for an ITIN (see IRS Can’t Authenticate Foreign Documents for ITIN Applications).
“This has nothing to do with any of those past activities,” said Holland. “This is being implemented as a result of legislation that was passed as part of the PATH Act. The IRS took significant action back in 2012 to strengthen the ITIN program as a result of the report.”
Although the IRS plans to send about 400,000 letters in the next few weeks to individuals who have middle digits of 78 or 79 in their ITINS, and there are roughly 11 million individuals who could be potentially affected, many of them will not need to renew if they have not been filing tax returns in recent years.
“I think it’s important to emphasize that the taxpayers who are in those two groups that we described only need to renew if they need to file a federal tax return,” said Holland. “If, for example, they are individuals who have not used an ITIN on a tax return in any of the last three years and if they have no reason to file in this upcoming year, then there’s no reason for them to renew. It’s not everyone in those groups. It’s only those taxpayers who need to file a return.”
Going forward, the IRS hopes to make the renewal process as simple and straightforward as possible. “We’ll continue working with our partners across the country,” said Holland. “We want to make sure that everyone with an expiring ITIN gets the renewal information and understands what steps they need to take to renew.”
For more information, visit the ITIN information page on IRS.gov.
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