New Rules On ITINs: What This Means For You?

For a quick refresher on what ITINs are: Individual Taxpayer Identification Numbers aka ITINs are tax processing numbers issued by the Internal Revenue Service. It is a nine digit number that always begins with the number 9 and has a range of 70-88 in the fourth digit, example 9XX-7X-XXXX. The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code.

Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception. You can also use the Form W-7, to apply for the ITIN. 

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.

As of June 30th, 2014, Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years. The IRS will not begin deactivating ITINs until 2016.

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. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
• To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season. 
• A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form. 

Bibliography: irs.gov News Releases; Form W-7.

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As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. 

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