Section 203 of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), Pub. L. 114-113, div. Q, enacted on December 18, 2015, modified section 6109 of the Internal Revenue Code, and in so doing, made significant changes to the Individual Taxpayer Identification Number (ITIN) program. This notice explains those changes, how the Internal Revenue Service (IRS) will implement the changes, and the potential consequences to taxpayers who do not renew an ITIN when required by the PATH Act.
Section 6109 permits the IRS to issue identifying numbers for tax purposes (taxpayer identification numbers) and to request information to issue such numbers. Generally, an individual’s taxpayer identification number is a social security number (SSN); however, some individuals are ineligible to receive an SSN but still need a taxpayer identification number for U.S. tax purposes.
An ITIN is a nine-digit tax processing number issued by the IRS that is formatted like an SSN, NNN-NN-NNNN. Each ITIN begins with the number 9 and has fourth and fifth digit ranges from 50-65, 70-88, 90-92, and 94-99. The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number for U.S. tax purposes but who do not have, and are not eligible to obtain, an SSN from the Social Security Administration (SSA). The PATH Act made changes to the ITIN program.
The basic process for applying for an ITIN will not change as a result of the PATH Act. Individuals apply for an ITIN by submitting Form W-7, Application for IRS Individual Taxpayer Identification Number. Most taxpayers must submit their Form W-7 with the tax return for which the ITIN is needed. Both domestic and foreign applicants may submit their Form W-7, tax return, and the required documentation by mail to the ITIN Operation Unit in Austin, Texas. Original documents or certified copies of documents from the issuing agency are the only acceptable documentation, except for a few very limited exceptions.
Under the PATH Act, in-person applications may be submitted to an employee of the IRS authorized to review and accept applications or to a certified acceptance agent approved by the IRS, such as www.ustaxservices.ca . Currently, all IRS employees authorized to review and accept applications are located in the United States.
For ITINs issued before 2013, the PATH Act provides that ITINs will no longer be in effect according to the following schedule, unless the ITIN has already expired due to nonuse for three consecutive years as described above:
• ITINs issued before 2008 will remain in effect until January 1, 2017.
• ITINs issued in 2008 will remain in effect until January 1, 2018.
• ITINs issued in 2009 or 2010 will remain in effect until January 1, 2019.
• ITINs issued in 2011 or 2012 will remain in effect until January 1, 2020.
HOW TO RENEW AN ITIN
ITINs that have expired due to nonuse in the last three consecutive years, as described above, may be renewed anytime starting October 1, 2016 by submitting a Form W-7 and required documentation. These individuals may renew their ITIN without having to attach a tax return to the Form W-7. Filers should use the most recent revision of the Form W-7 and check the box that says "renewal." Once the Form W-7 renewal application is approved, the individual’s ITIN will again be effective, and the individual can continue to use the same ITIN. The applicant will receive a letter from the IRS stating that the application has been approved. Once renewed, an ITIN will remain in effect unless it is not used on a tax return for three consecutive years.
ITINs issued prior to January 1, 2013 that have been used on a tax return in the last three consecutive years are set to expire based on a multi-year schedule. Under the PATH Act, this schedule is based on the date that an ITIN was issued. However, many ITIN holders may not know when their ITIN was issued and previously had no reason to keep a record of the date an ITIN was issued. To simplify the renewal process and allow for the effective administration of the program, the IRS will administer the renewal of ITINs on a schedule that is different from the schedule in the PATH Act. The IRS will renew ITINs based upon the fourth and fifth digits (middle digits) in the ITIN. ITINs that contain the middle digits of 78 or 79 will no longer be in effect beginning January 1, 2017. The expiration and renewal schedules for ITINs with middle digits other than 78 or 79 will be announced in future guidance.
Beginning this summer, the IRS will send a Letter 5821 to individuals holding ITINs with the middle digits of 78 or 79 if the ITIN was used for a taxpayer or a dependent on a U.S. income tax return in any of the last three consecutive tax years informing them that they may submit a Form W-7 with original or certified documents to renew their ITINs. The Letter 5821 will be sent to the address used on the most recent income tax return on which the ITIN appears or the most recently updated address for the taxpayer who filed the tax return provided to the IRS by the taxpayer or the U.S. Postal Service.
An individual with an ITIN that contains the middle digits of 78 or 79 who is sent a Letter 5821 may submit a Form W-7 and required documentation to renew their ITIN starting October 1, 2016. These individuals may renew their ITIN without having to attach Form W-7 to a tax return. Filers should use the most recent revision of Form W-7 and check the box that says "renewal." To expedite processing, filers should include a copy of Letter 5821. The IRS anticipates that for applications mailed to the IRS under this process, documents will be returned to the applicant within 60 days from the date the application was received. Alternatively, individuals who are sent a Letter 5821 may choose to wait to submit their Form W-7 with their tax return. Once a Form W-7 renewal application is approved, the individual’s ITIN will again be effective, and the individual can continue to use the same ITIN.
To reduce the burden on taxpayers, the IRS will accept Forms W-7 from each member of a family in a single family submission starting October 1, 2016, if at least one of the family members is required to renew an ITIN because the middle digits are 78 or 79 and that family member received a Letter 5821. For this purpose, family members include the filer, the filer’s spouse, and any dependents claimed on the filer’s return.
ITINs with middle digits other than 78 or 79 that have been in use within the last three consecutive tax years should not be renewed and require no immediate action from the ITIN holder. The IRS will accept, and individuals should continue to file, tax returns using these existing ITINs. The IRS will provide information about the expiration schedule and renewal process for the remaining ITINs issued before 2013 in future guidance and expects the expiration and renewal process for the remaining ITINs to be completed over multiple years.
WHAT MAY HAPPEN IF AN ITIN IS NOT RENEWED
Once renewed, an ITIN will remain in effect unless it is not used on a tax return for three consecutive years. The issuance date of a renewed ITIN is the date the ITIN was originally issued, not the renewal date. Some individuals may not be aware that their ITIN has expired or that they must renew an expired ITIN. Returns filed by these individuals will be accepted by the IRS; however, there may be a delay in processing these returns, and certain credits, such as the Child Tax Credit and the American Opportunity Tax Credit, may not be allowed unless the ITIN is renewed. This could result in a reduced refund or additional penalties and interest. The IRS will notify these filers about the delay and any reduction in refunds and credits claimed and will inform them about the need to file Form W-7 to renew their ITIN.
HOLDERS OF EXPIRED ITINS WHO HAVE OR BECOME ELIGIBLE FOR AN SSN
An individual with an expired ITIN who has or becomes eligible for an SSN should not renew the ITIN. Instead, those individuals who already have an SSN should write a letter to the IRS or visit a local IRS office explaining that they now have an SSN and that they want all their tax records combined under their SSN. Details about what to include with the letter and where to mail it can be found at www.irs.gov/Individuals/Additional-ITIN-Information. Those individuals who are eligible to obtain an SSN should obtain one from the SSA and then follow the instructions above. Visit the SSA website at www.ssa.gov, for information on how to apply for an SSN.
USE OF AN ITIN SOLELY ON AN INFORMATION RETURN
An individual whose expired ITIN is used only on information returns filed and furnished by third parties, such as Forms 1099, is not required to renew the ITIN. ITINs may continue to be used for information return purposes regardless of whether they have expired for individual income tax return filing purposes. If the individual is later required to file a tax return, however, the individual’s ITIN will have to be renewed at that time. Additionally, the third parties who file and furnish information returns with an expired payee ITIN will not be subject to information return penalties under sections 6721 or 6722 solely because the ITIN is expired.