Changes to the ITIN Program: What You Should Know
By Jeff McCann, CPA
In order to file a US tax return you generally must have a Social Security Number. However, there may be instances in which an individual has a US filing requirement but is not eligible to receive a Social Security Number. In these instances an individual must apply for an Individual Taxpayer Identification Number (ITIN) with the Internal Revenue Service.
The ITIN can be applied for using Form W-7, Application for IRS Individual Taxpayer Identification Number. The taxpayer must provide a copy of his tax return and original proof of identity (a passport would be the most common document) with the ITIN application. When an individual is unable or unwilling to mail an original identification, a copy of the identification can be provided to the IRS when certified by the issuing agency. Alternatives to mailing the application and identification include locating an acceptance agent or personally appearing at a Taxpayer Assistance Center (TAC).
Historically, once an ITIN was issued it could be used by a taxpayer indefinitely. In December 2015 Congress enacted the PATH (Protecting Americans from Tax Hikes) Act. Among the items covered in this Act was a provision requiring individuals who were issued ITINs prior to 2013 to renew their ITINs on a staggered schedule between 2017 and 2020. Additionally, the Act provides that an ITIN will expire if it is not used to file a tax return for three consecutive years. The Act intends that by 2020 all applications will have to be filed in person by applicants.
To prepare taxpayers for these changes the IRS released Notice 2016-48 outlining procedures related to ITINs.
Current ITIN Holders: How to Be Prepared for These Changes
Beginning January 1, 2017, ITINs containing the middle digits 78 or 79 will expire. If you are not filing a return for the 2016 tax year, there is no action required by you at this time. However, if you have a 2016 filing requirement and your ITIN contains the middle digits of 78 or 79, or if your spouse and dependents hold an ITIN containing the middle digits 78 or 79, you will need to renew your ITINs in order to file your 2016 tax return.
The IRS began processing renewals on October 1, 2016. If the ITIN expiration provisions apply to you or any of your dependents, our recommendation is to prepare your 2016 US tax filing and also submit applications for new ITINs for all family members in the same instance in order to prevent contending with the renewal process more than one time.
The IRS has confirmed that it will accept a renewal application from each family member on a return when at least one person has an ITIN that is expiring.
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Throughout his career, Jeff McCann has served as a consultant for many international clients. From expatriate payroll compliance and program processes, to social security and totalization agreements, through in-depth technical expertise in expatriate and alien taxation, Jeff has experience doing it all. With a diverse background in international affairs, he has helped clients with individual tax planning strategies in home and host locations, executive compensation plans and foreign assignment cost minimization planning. Contact him at email@example.com or +1 (248) 244-3065.