Every year around this time we get requests from some of our clients to assist them in obtaining ITIN (Individual Taxpayer Identification Numbers) for some of their employees who are bringing or have brought over their foreign spouses and children to live in the United States. An ITIN is requested in lieu of obtaining a social security number for foreign individuals who are coming to stay in the United States for a limited period of time. This application is filed with an IRS Form W-7 and attached to Form 1040 (U.S. Individual Income Tax Return). This becomes an issue when filing the U.S. Individual Income Tax Return, since the IRS will not process such returns unless there is either a social security number or an ITIN for each person listed on the return. In the “good old days” you could simply put “applied for” on the tax return instead of an ITIN or social security number.
The IRS put new procedures into place at the end of 2012 (which went into effect for all ITIN applications in 2013) that are designed to strengthen the ITIN process. The new procedures are the result of too many fraudulent tax identification numbers being handed out in the past few years, and as a result, the large increase in fraudulent tax returns being filed. The IRS tax publications were updated to show the changes with the 2013 tax year filings.
Under the new procedures, the IRS has mandates around which documentation can be used to verify identities, including providing original certified passports (no longer copies of passports), using a Certified Acceptance Agent and providing medical and school records for children. A Certified Acceptance Agent can review the documentation received along with the Form W-7 application and can provide a certified approval, which will allow the Form W-7 request and information to flow through the IRS system.
I spoke to a Certified Acceptance Agent today who told me that two years ago, she was getting one or two requests a year and today she is getting ten to twenty requests a month. She also told me how stringent the rules have become for her to certify a Form W-7, and that she is now being audited annually by the IRS.
The IRS is doing its best to combat fraud in the filing of individual tax returns, and a Certified Acceptance Agent is now another valuable step in the process.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.