New ITIN Changes

Section 203 of the PATH Act layouts the requirements for the issuance of ITINs. The provision requires that individuals who were issued ITINs before 2013 are required to renew their ITINs on a staggered schedule between 2017 and 2020. The provision also provides that an ITIN will expire if an individual fails to file a tax return for three consecutive years. Finally, the provision directs the Treasury Department and IRS to study the current procedures for issuing ITINs with a goal of adopting a system by 2020 that would require all applications to be filed in person.
ITIN Quick Facts:

93% of ITIN applicants submit their W7 application with a tax return.

23 Million ITINs have been issued since 1996.

308,000 ITIN Renewal Letters (5821) have been mailed out since August 2016.

ITINs with middle digits of 78 and 79 are the oldest ITINs in the system.
Who Has to Renew an ITIN

There are two groups of people who need to renew their ITINs:

  1. ITINs not used on a federal income tax return in the last three years (covering 2013, 2014, or 2015) will no longer be valid to use on a tax return as of Jan. 1, 2017. ITIN holders in this group who need to file a tax return next year will need to renew their ITINs.
  2. ITINs issued before 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 (Example: 9XX-78-XXXX). The IRS has mailed 308,000 letters to this group of taxpayers to inform them of the need to renew their ITINs.

How to Renew an ITIN

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. Individuals renewing an ITIN do not have to attach a tax return when submitting their Form W-7; however, the applicant should attach letter 5821 if they received it.

There are three methods taxpayers can use to submit their W-7 application package to renew their ITIN. They can:

  1. 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),
  2. Use one of the many IRS authorized Certified Acceptance Agents or Acceptance Agents around the country, or
  3. In advance, call and make an appointment at an IRS Taxpayer Assistance Center in lieu of mailing original identification documents to the IRS.

The schedule for expiration and renewal of ITINs that do not have middle digits of 78 and 79 will be announced this Summer.
Certifying Acceptance Agent (CAA) Program Changes

 

  1. Certification Process Changes (2016)
    CAAs will now be allowed to authenticate the passport and birth certificate for dependents. CAAs will continue to certify identification documents for the primary and secondary applicants.
  2. ITIN Acceptance Agent Applications Accepted Year Round (2016)
    Form 13551, Application to Participate in the IRS Acceptance Agent Program, will now be accepted year-round.
  3. Certified Acceptance Agent Recruitment (2016)
    The Service is actively recruiting Certified Acceptance Agents. The goal is to increase the availability of individual ITIN services nationwide, particularly in communities with high ITIN usage.

What if I Forget to Renew my ITIN?

If an individual files a tax return with an expired ITIN, the IRS will process the return BUT will exclude the exemption and credits associated with the expired ITIN. This may cause the refund to be much less. When the individual finally renews their ITIN, the IRS will then issue the remaining refund.

Tax Pro Tip

Be proactive and reach out to your clients NOW. You should be communicating with your clients at least once a month. Do you have an email newsletter? Do you have a way to text your clients? There are many ways to reach your clients. At the very least call your ITIN clients with middle digits 78 & 79 and let them know to come in now to renew. For more information on the latest ITIN changes, check out these new IRS publications:

Publication 5259 – ITIN Fact Sheet: https://www.irs.gov/pub/irs-pdf/p5259.pdf

Publication 5257 – ITIN Renewals: https://www.irs.gov/pub/irs-pdf/p5257.pdf

 

 

Robin Johnson

C.G. Johnson & Company

Income Tax and Accounting Services

210 E. 3rd Street #305

Long Beach, CA 90802

818-990-6529 V

818-817-9312 F

www.CGJAccounting.com

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