Purpose of an ITIN Number
The IRS issues Individual Taxpayer Identification Numbers (ITIN) to individuals who have U.S. tax filings and who do not have, or are not eligible to obtain, a Social Security Number (SSN) from the Social Security Administration (SSA). ITIN numbers are for federal tax reporting only, and are not intended to serve any other purpose. ITIN numbers assist the Internal Revenue Service (IRS) in efficiently and effectively accounting for, and processing, tax returns and payments of individuals who are not eligible for a SSN.
Expiration of ITIN Numbers
Before the passing of the PATH Act in December of 2015, a taxpayer applied for and received an ITIN number only once. The individual was not required to renew his or her ITIN number. The PATH Act now provides that any ITIN number that is not used on a federal tax return for three consecutive tax years will automatically expire. This includes ITIN numbers of the individual filing the return and the ITIN number for any dependents. The ITIN number will expire on December 31 of the third consecutive tax year.
For ITINs issued before 2013, the PATH Act provides a phase-out schedule that specifies dates when ITIN numbers will need renewed by unless the ITIN has already expired due to nonuse for three consecutive years:
- 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.
Individuals who received their ITIN number before 2013 and are subject to the renewal schedule above only have to renew their ITIN number this one time. They will not be subject to a second renewal.
The IRS will begin to send Letter 5821 to ITIN holders who used their ITIN in the last three years but whose ITIN is about to expire. Letter 5821 will be sent to the address reported on the most recent tax return of the individual. To expedite the renewal approval process, filers should attach a copy of their 5821 letter with their Form W-7 Application for IRS Individual Taxpayer Identification Number.
Individuals who have an expired ITIN due to nonuse over three consecutive years may renew their ITIN anytime starting October 1, 2016 by submitting a Form W-7 and checking the renewal box, with the required documentation. Individuals may choose to wait to renew their ITIN by mailing the Form W-7 with their tax return. The IRS will send the applicant a letter in the mail, approving their application. The issuance date of an ITIN is always the date the ITIN was originally issued, not the renewal date.
Failure to renew an ITIN may prohibit individuals from claiming the Child Tax Credit and American Opportunity Tax Credit when filing their tax return. A tax return may also be delayed if it contains an expired ITIN, incurring additional penalties and interest. The IRS will notify filers that they must renew their ITIN in order to claim the credits on their tax return.
Expired ITINs Reported on Information Returns
Individuals whose ITIN numbers are only used for information returns are not required to renew their ITIN. If the individual is required to file an income tax return, his or her ITIN must be renewed at that time. Organizations that file information returns with an expired ITIN number of a payee will not be subject to penalties under Sections 6721 or 6722.
For more information, visit IRS Notice 2016-48, Implementation of PATH Act ITIN Provisions. Please contact us with questions and visit the Our Thoughts On blog for more tax related articles.