IRS Announces New Policy For Individual Taxpayer Identification Numbers / ITINs

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What is an ITIN and What is it Used For?

An ITIN is a nine-digit tax processing number issued by the IRS for federal tax reporting only. The ITIN is not intended to serve any other purpose. The ITIN does not authorize one to work in the US and it cannot be used as an identification number or for any purpose outside the US tax system.

Who Needs an ITIN?

The IRS issues ITINs to individuals who are required to have a US taxpayer identification number but who are not eligible to obtain a Social Security Number (SSN). If an individual is eligible to obtain a SSN, he should NOT be applying for an ITIN. ITINs are issued to so-called ‘resident aliens’ (e.g., one holding a US visa) and to ‘nonresident aliens’ since both may have a US tax filing or reporting requirement under the US tax laws. Generally, an ITIN will be issued if the individual has such a filing requirement.

Some examples of individuals who need ITINs include a nonresident alien required to file a US tax return. This can occur if the nonresident alien individual has certain types of US source income, such as rental income from a US property. Other individuals who need an ITIN include a foreign individual required to file a US tax return because he qualifies as a US “resident alien” based on the amount of time he has been physically present in the US. Someone who is listed on a tax return such as a spouse (in order to file a joint tax return), or a dependent (in order to claim a dependency exemption) and who is not eligible to obtain a valid SSN, must apply for an ITIN. This is generally the case of a nonresident alien dependent or nonresident alien spouse of a US citizen or a US resident alien; a nonresident alien dependent or spouse of a nonresident alien visa holder.

IRS New Policy Regarding Validity of ITINs – Expiration No Longer Automatic

On June 30, the IRS announced that ITINs will expire only if the number is not used on a federal income tax return for five consecutive years. FAQ’s on the new policy can be found at HERE.

Further information was issued by the IRS on July 2.

In order to provide sufficient time to adjust and to allow the IRS to reprogram its systems, the IRS will not begin deactivating ITINs until 2016. This is a new policy and it replaces the existing policy that became effective on Jan. 1, 2013. Under the old policy, announced in November 2012, ITINs issued after Jan. 1, 2013 would have automatically expired after five years, even if used properly and regularly by taxpayers. Though ITINs issued before 2013 were unaffected by that change, the IRS said at the time that it would explore options for deactivating or refreshing the information relating to these older ITINs.

This new policy applies to any ITIN, regardless of when it was issued. According to the IRS, only about one-fourth of the 21 million ITINs issued since the program began in 1996 are being used on tax returns. The new policy will ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in the likely eventual expiration of millions of unused ITINs.

Under the new policy:

• An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
• Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. Thus, taxpayers will no longer face mandatory expiration of their ITINs pursuant to the old policy.
• A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. The taxpayer must ensure he also supplies sufficient identifying documentation. Original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

In accordance with Circular 230 Disclosure

Original Post By:  Virginia La Torre Jeker, J.D.

Virginia La Torre Jeker J.D., has been a member of the New York Bar since 1984 and is also admitted to practice before the United States Tax Court. She has 30 years of experience specializing in US and international tax planning as well as international commercial transactions. She has been based in Dubai since 2001; prior to that time she worked in Hong Kong for 15 years as a US tax consultant for international law firms, major banks (including HSBC) international accounting firms (Deloitte) and trust companies. Early in her career she worked in New York with the top-tier international law firm, Willkie Farr & Gallagher.

Virginia is regularly asked to speak at numerous conferences and seminars for various institutes and commercial organizations; publishes a vast array of scholarly works in her area of expertise, been interviewed by CNN and is regularly quoted (or has her articles featured) in local and international publications. She was recently appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. She was a guest lecturer at the University of Hong Kong, LL.M Program (Law Department) and served as an adjunct Business Law professor at the American University of Dubai and at the American University of Sharjah where she also taught the legal / ethical aspects of internet law and internet based transactions.


One comment

  1. Rod Dorothy says:

    If you go through a Certified Acceptance Agent (CAA) you do not have to send original documents. For the primary or secondary taxpayer.

    Rod Dorothy, Enrolled Agent, CAA

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