19 August 2016 IRS releases guidance to taxpayers affected by ITIN changes; renewals begin in October 2016 On August 4, 2016, the Internal Revenue Service (IRS) released important guidance to help taxpayers comply with the changes to the Individual Taxpayer Identification Number (ITIN) program enacted in December 2015. An ITIN is used by taxpayers who are not eligible for a social security number, but who need to file a US tax return. The changes require some taxpayers to renew their ITINs beginning in October 2016. ITINs that have not been used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return unless renewed by the taxpayer. In addition, ITINs issued prior to 2013 will need to be renewed according to a phased-in schedule. For example, ITINs issued prior to 2008 will need to be renewed for 2016 tax returns, as they expire on January 1, 2017, even if they have been used on a federal tax return in the last three years. The ITIN changes are required by the Protecting Americans from Tax Hikes (PATH) Act enacted in December 2015. These provisions, along with new procedures to help taxpayers navigate through these changes, are outlined in IRS Notice 2016-48, which was released on August 4, 2016. An ITIN (Individual Taxpayer Identification Number) is a nine-digit tax processing number issued by the IRS that is formatted like a social security number, XXX-XX-XXXX. Each ITIN begins with the number 9 and has the combined fourth and fifth digits ranging from 50-65, 70-88, 90-92, and 94-99. The IRS issues ITINs to individuals who are required to have a US taxpayer identification number but who do not have, and are not eligible to obtain, a social security number from the Social Security Administration. Prior to the PATH Act, a taxpayer applied for and received an ITIN only once. However, the PATH Act made changes to the ITIN program and under the PATH Act, ITINs previously issued by the IRS that are not used for three consecutive years on federal tax returns will no longer be effective indefinitely, but remain valid only if they are renewed. Therefore, an ITIN that has not been used on a federal tax return for three consecutive years will expire on December 31 of the third consecutive year of non-use. In addition, ITINs issued before January 1, 2013, are set to expire regardless of use according to the expiration schedule included in the PATH Act. The IRS states that no action is needed by ITIN holders if they don’t need to file a tax return next year. Therefore, there are two fundamental groups of ITIN holders who may need to renew an ITIN so it will be in effect for returns filed in 2017: — ITINs that have not been used on a federal income tax return in the last three years (i.e., covering tax years 2013, 2014, or 2015) will no longer be valid to use on a tax return as of January 1, 2017. Therefore, ITIN holders in this group who need to file a tax return next year will need to renew their ITINs. The renewal period begins on 1 October 2016. — ITINs issued before January 1, 2013, will begin expiring this year, and taxpayers will need to renew them on a rolling basis. The first ITINs that will expire under this schedule are those with middle digits of 78 and 79 (e.g., 9XX-78-XXXX). The renewal period for these ITINs begins October 1, 2016. The IRS will begin mailing letters to this group of taxpayers starting this month (August 2016) to inform them of the need to renew their ITINs if they need to file a tax return. The letter will explain steps they need to take. — The schedule for expiration and renewal of ITINs that do not have middle digits of 78 and 79 will be announced at a future date. Only ITIN holders who need to file a tax return need to renew their ITINs. Others do not need to take any action at this time. Starting October 1, 2016, ITIN holders can begin renewing ITINs that are no longer in effect because of three years of non-use or that have a middle digit of 78 or 79. To renew an ITIN, taxpayers must complete a Form W-7, Application for IRS Individual Taxpayer Identification Number, follow the instructions and include all information and documentation required. To reduce the burden on taxpayers, the IRS will not require individuals renewing an ITIN to attach a tax return when submitting their Form W-7. Taxpayers are reminded to use the newest version of the Form W-7 available at the time of renewal which will be posted by the IRS in September (Use version "Rev. 9-2016"). There are three methods taxpayers can use to submit their W-7 application package to renew their ITIN. They can: — Mail their Form W-7 — along with the original identification documents or certified copies by the agency that issued them — to the IRS address listed on the form (identification documents will be returned within 60 days), — Use one of the many IRS authorized Certified Acceptance Agents or Acceptance Agents around the country, or — In advance, call and make an appointment at an IRS Taxpayer Assistance Center (IRS TAC office) in lieu of mailing original identification documents to the IRS. Taxpayers also may renew their ITINs when they file their income tax returns. However, this method is not recommended due to the possibility of filing and processing delays. To make this renewal effort easier and reduce paperwork, the IRS will be offering a family option for ITIN renewal. If any individual having an ITIN 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 rather than doing them separately over several years. Family members include the tax filer, the spouse and any dependents claimed on their tax return. Beginning October 1, 2016, the IRS requires a date-of-entry stamp in the passport of dependents (other than those from Canada and Mexico, or dependents of US military members overseas) for use as a stand-alone identification document. If the passport does not have a date-of-entry stamp, additional documents will be required. ITINs are for federal tax purposes only and are not intended to serve any other purpose. ITINs that are only used on information returns filed with the IRS by third parties do not need to be renewed.
Document ID: 2016-1422 | |||||||
