FAQ: What are the new IRS procedures for Individual Tax Identification Numbers?

The IRS announced in August new procedures for renewing an unused or expired Individual Tax Identification Number (ITIN). The new procedures are scheduled to take effect later this year and will impact 2016 federal individual income tax returns filed in 2017.

PATH Act changes

ITINs are used by individuals who have federal tax filing or payment obligations but who do not have a Social Security number (SSN). Examples of individuals who may use an ITIN include nonresident aliens filing a return, a U.S. resident alien filing a return, a dependent or spouse of a U.S. citizen or resident alien, or a dependent or spouse of a nonresident alien visa holder.

In the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) Congress made some significant changes to the rules for ITINs. Any ITIN issued after December 31, 2012 will expire if not used on a federal return for a period of three consecutive tax years. ITINs issued before 2013 are subject to a rolling expiration schedule.

New procedures

Now, the IRS is starting to issue guidance to reflect the PATH Act’s changes to ITINs. The changes made at this time by the IRS impact two groups of ITIN holders:

Unused ITINs. The first group encompasses people who have not used their ITINs on a federal tax return at all in the last three years. That means they have not been used on a tax return in 2013, 2014 or 2015. The ITINs of individuals in this group expire at the end of 2016. The renewal period for this group of ITIN holders is scheduled to begin October 1, 2016.

Expiring ITINs. The second group is made up of individuals who have an ITIN issued before 2013. These ITINs are scheduled to expire at the end of 2016. The IRS is renewing these ITINs on a rolling basis. The first ITIN holders up for renewal in this group are individuals who have ITINs with middle digits of 78 or 79.

The IRS is encouraging individuals not to renew their ITINs at this time unless they are in either of these two groups. To renew an ITIN, taxpayers complete a Form W-7, Application for IRS Individual Taxpayer Identification Number. Individuals who need to renew their ITINs, and who fail to renew, may face delays in the processing of their returns, the IRS cautioned.

Family option

If an individual has an ITIN middle digit of 78 or 79, he or she can choose to renew the ITINs of all of their family members at the same time starting October 1, 2016. Family members include the tax filer, the filer’s spouse and any dependents claimed on their return.

Other ITIN holders

ITINs with middle digits other than 78 or 79 that have been used within the last three consecutive tax years require no immediate action. The IRS explained that it will accept, and individuals should continue to file, tax returns using these existing ITINs. More information will be released in the future about the renewal process for ITINs with middle digits other than 78 or 79.

If you have any questions about the new IRS procedures for ITINs, please contact our office.