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The IRS Wants You to Renew Your ITIN

11/08/2016


The U.S. Internal Revenue Service doesn’t know who you are – but they do know your number. They basically can’t do much of anything without your number. So logically, they’ve just made it harder for you to have one. This is how governments work.

Most Americans use a Social Security number (“SSN”) as an identifier, but not everyone is legally entitled to an SSN. To get one, you have to be legally entitled to live or work in the United States. But many more people need to deal with the IRS. For them, the IRS created Individual Taxpayer Identification Number (ITINs).

The problem is that some people have used these ITINs incorrectly, claiming exemptions they’re not entitled to or increasing the amount of their Earned Income Credits. Some people have used the ITIN as a SSN, pretending they’re entitled to work.
To reduce this fraud, as part of the “Protecting Americans from Tax Hikes (“PATH”) Act of 2015, Congress required the IRS to develop a system where ITINs regularly expire and require renewal.

There are two categories of people who have ITINs: Those who use them for withholding tax only and those who use them on tax returns.

Withholding tax

If you earn U.S.-source income like interest, dividends or royalties, the U.S. payer is required to withhold US tax on payments to you. To ensure they withhold tax at the right rate (even zero), they are supposed to require you to provide them with form W-8BEN. On that form, there’s a space for your ITIN.

The good news is, ​if this is the only reason you have an ITIN, you’re good to go. There’s nothing to do.

Filing a tax return

If, however, you have an ITIN that’s used on a tax return – yours or a dependent’s – then you will need to get that number renewed at some point.
ITINs that haven’t been used on a 2013, 2014 or 2015 US tax return will automatically expire. In addition, ITINs issued before 2013 will expire. They have middle digits of 78 and 79. The IRS will start renewing them October 1, 2016.

How to renew

The process for renewal will be pretty much the same as it was for getting the original number. There will be a new W-7 application form, which will have a box you can mark for “renewal”. It’s not available yet. You will have to provide original documentation supporting your identity, and foreign status. For most people, a passport will be enough, but there’s a special rule for dependents who:

  • Live outside Canada and Mexico and
  • Do not have a U.S. “date of entry” stamped in their passports

These people will have to provide proof of their residency.

There are four ways of processing the form:

  • Mailing it, along with the original documentation, to the IRS;
  • Using a Certified Acceptance Agent (MNP can do this for you at any of our offices across the country);
  • Going to an IRS Taxpayer Assistance Center and
  • Sending the application with the tax return.

I know, I know – more bureaucracy. C’est la vie. It’s the price of maintaining the integrity of the system.
Notice 2016-48

Contact Kevyn Nightingale, CPA, CA (ON), CPA (IL), TEP Business Advisor, International Tax at 416.515.3881 or [email protected]