Tax Tip ITIN
The IRS estimates that almost 2 million individual taxpayer identification numbers (ITINs) will expire as of December 31, 2019. These ITINs have the middle digits of 83, 84, 85, 86 and 87 (XXX-83-XXXX for example). In addition, any ITIN that has not been used on a U.S. tax return for the past 3 years will also expire.
ITINs with middle digits of 70 through 82 have previously expired. Taxpayers with these ITINs can still renew at any time, if they have not renewed already.
Spouses and dependents residing outside of the U.S. only need to renew their ITIN if filing an individual tax return, or if they qualify for an allowable tax benefit (e.g., a dependent parent who qualifies the primary taxpayer to claim head of household filing status.)
Designed specifically for tax-administration purposes, ITINs are issued by the Internal Revenue Service only to those people who are not eligible to obtain a United States Social Security Number (SSN). ITINs assist the IRS with the collection of taxes from foreign nationals, nonresident aliens and others who have filing or payment obligations under U.S. law. Taxpayers who are eligible for a United States SSN must apply for a SSN through the United States Social Security Administration, they are not eligible for an ITIN.
The IRS encourages affected taxpayers to renew their ITIN as soon as possible in order to reduce potential delays in obtaining potential refunds. Federal tax returns that are submitted in 2020 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, applicable credits and exemptions will be restored, and any refunds will be issued.
ITINs are renewed by filing Form W-7, “Application for IRS Individual Taxpayer Identification Number”, along with the necessary documentation. Based on our experience the best documentation is a certified copy of their passport. Documents can only be certified by the issuing agency/department.
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All United States persons (citizens and green card holders) are required to obtain a Social Security Number (“SSN”). This number, which stays with an individual for life, is used for all U.S. government benefits and services, including tax administration. A U.S. person should never apply for an Individual Taxpayer Identification Number (“ITIN”) through the IRS as these numbers are for U.S. Nonresident Aliens only.
An SSN is used for many purposes outside of government benefits and taxes. It is also used as an identification number for most state governments, universities, and in the private sector for things like an individual’s credit history or banking information. For this reason, the Social Security Administration is quite cautious when assigning new Social Security Numbers and advises individuals to keep their number secure at all times.
There are three types of Social Security cards issued. The first is for U.S. citizens and residents (green card holders) which entitles an individual to government benefits and to work in the US. The second type of card is issued to individuals who are admitted to the U.S. on a temporary basis and will be marked as “Valid for work only with DHS authorization.” The third type, which is marked “Not valid for employment” is for those individuals who are required to have an SSN but are not authorized to work in the U.S.
Applications for a new Social Security Number or a replacement card can only be made in person at a Social Security Administration office. There are no Social Security offices in Canada, but there are specific offices in the U.S. that are designated to assist Canadian residents. A list of these offices can be found on the Social Security website at www.ssa.gov/foreign/canada.htm. The office closest to the GTA is in Niagara Falls, New York.
Individuals are encouraged to check the Social Security Administration website or call the local office before visiting to determine what documentation will be required. Generally proof of citizenship and other identifying information will be required. In addition, for adult individuals who are U.S. citizens and who are applying for a new Social Security Number, they will be required to provide documentation supporting their foreign residency. Several of our clients have reported that this documentation requirement has included obtaining school and employment records for the entire period they were resident outside of the United States. It can be quite a challenge to collect all this information, so best to check first before a trip to the office is made.
After an SSN is obtained, it is important to keep your information up-to-date. Name changes must be made directly with the Social Security Administration and cannot be made by individual government agencies (such as the IRS). Your address should also be regularly updated to make sure that all communication is reaching you.
Individual Taxpayer Identification Numbers (ITINs) are tax processing numbers, issued by the U.S. Internal Revenue Service (IRS), for certain resident and non-resident aliens, their spouses, and their dependents. In general, no U.S. personal tax returns can be filed without a proper tax identification number (except when you are filing form W-7, “Application for IRS Individual Taxpayer Identification Number” with your initial U.S. personal tax filing).
An ITIN is used when a taxpayer does not qualify for a U.S. Social Security Number (SSN). IRC §6109(i) provides the Secretary the authority to issue an individual taxpayer identification number.
On November 29, 2012 the IRS issued IR-2012-98, which indicated that ITINs, issued after January 1, 2013, would automatically expire after five years, even if used properly and regularly by taxpayers. On June 30, 2014 the IRS issued IR-2014-76 changing the policy. The revised policy was that ITINs would expire if the number had not been used in the last 5 years. ITINs would stay in effect as long as a taxpayer continued to file U.S. tax returns. The policy was then amended again, on August 16, 2016, such that ITINs will expire if not used in the last 3 years.
Each year a series of issued ITINs will expire. Those taxpayers whose ITINs will expire should submit their renewal as soon as possible. Failure to renew them by the end of 2018 may cause refund and processing delays when their 2018 return is filed in 2019.
The following ITINs are now expiring and need to be renewed as soon as possible.
- ITINs that expire at the end of 2018 have middle digits 73, 74, 75, 76, 77, 81 and 82 – for example: 9NN-73-NNNN.
- Those who must renew their ITIN can choose to renew their family member’s ITINs together, even if family members have an ITIN with middle digits other than those listed above. Family members include the tax filer, spouse and any dependents claimed on the tax return.
Taxpayers who’s ITINs expired due to lack of use, should only renew their ITIN if they have a filing requirement for 2019.
To renew their ITIN, taxpayers must complete a new W-7 application and submit all required documentation. Copies of documents must be certified by the issuing agency. Those using a Canadian passport as proof, must have Passport Canada provide and certify the copy. It has been our experience that if this is done, the W-7 application process is much smoother and more accurate.
Cadesky U.S. Tax Ltd. is a full service U.S. tax advisory and compliance firm. If you need assistance with your W-7 application we would be glad to assist. Please contact us for an appointment to discuss your situation.
If you are a US nonresident alien and have filed a US income tax return, you most likely have an IRS issued Individual Taxpayer Identification Number (ITIN). This is a number, assigned by the IRS, to those individuals who are not eligible for a US Social Security Number. As the holder of an ITIN, you may be affected by some recent changes in the ITIN administration program and may need to take action in order to keep your number.
In 2015, the US Congress mandated that the IRS expire inactive ITINs and all ITINs issued between the years of 1996 and 2012. In order to meet this mandate in a timely and systematic manner, the IRS has implemented a system where ITINs will expire over a series of years. For 2017 and 2018, the following ITINs are scheduled to expire:
- ITINs with the middle digits of 78 or 79 – expired on January 1, 2017
- ITINs with the middle digits of 70, 71, 72, and 80 – will expire on January 1, 2018
- ITINs not used on a US federal income tax return for the past three years.
If an ITIN is scheduled to expire, it can be renewed by completing a Form W-7 and providing a certified copy of a foreign passport. The Form W-7 can be submitted with the next-filed tax return, or it can be renewed in advance of filing.
US tax returns that are filed with an expired ITIN will still be processed by the IRS, however all personal exemptions claimed on the return will be denied. The taxpayer will receive a notice from the IRS citing a “math error” on the return. At that point, the taxpayer will have to file a Form W-7 to renew the ITIN and file an amended US income tax return to reinstate any denied exemptions.
We encourage taxpayers with an expiring ITIN to apply for renewal now, before the upcoming 2017 tax filing season. Doing so will reduce the processing time of your 2017 US income tax return. If you would like assistance with the ITIN renewal office, please contact Cadesky US Tax Ltd. at (416) 594-9500.
The above information is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of section 10.37(a)(2) of U.S. Treasury Department Circular 230. The contents of this document are intended for general information purposes only.