OUR THOUGHTS ON:

Change in Policy for Taxpayer Identification Numbers

Tax

By Dennis Mowrey

Individual Taxpayer Identification Numbers (ITINs) will expire if they are not used on a federal income tax return for any year during a period of five consecutive years. This is according to a June 30, 2014 announcement made by the Internal Revenue Service (IRS). To give all interested parties time to adjust and also allow the IRS time to reprogram its systems, the IRS will not begin deactivating ITINs until 2016.

The new policy applies to any ITIN, regardless of when it was issued. Only about a quarter of the 21 million ITINs issued since the program began in 1996 are being used on tax returns. The new policy will ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in millions of unused ITINs that will eventually expire.

This new policy will replace the old policy, which went into effect on January 1, 2013.  Under the old policy, ITINs issued after January 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 of the old policy enactment that it would explore options for deactivating or refreshing the information relating to the older ITINs.

ITINs play a critical role in the tax administration system and assist with the collection of taxes from foreign nationals, resident and nonresident aliens and others who have filing or payment obligations under U.S. law.  ITINs are only issued to people who are not eligible to obtain a Social Security number.

To review; 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 a U.S. tax return (will not need to reapply after five years as under the old policy); the IRS will start deactivating ITINs in 2016, and any taxpayer whose ITIN gets deactivated can reapply for a new ITIN using IRS Form W-7.

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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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