Update: ITIN Compliance May Require Renewal Starting January 1, 2017
We have previously blogged about the upcoming changes to Individual Taxpayer Identification Numbers (ITNS) announced in IRS Notice 2016-48. These changes were implemented through the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The changes implemented by the PATH Act and announced in IRS Notice 2016-48 means that many current ITIN holders will need to take action to maintain their compliance with the U.S. Tax Code.
Ted Kleinman of U.S. Tax Help assists taxpayers living in the United States and abroad with tax concerns. To discuss how Ted can help with your ITIN concerns, foreign disclosure issues, and other tax issues please call U.S. Tax Help at (541) 923-0903.
Why Are Taxpayers Confused About ITIN Renewals?
Many taxpayers have expressed confusion regarding whether they need to update or renew their ITIN. If you have questions about this issue or any other tax issues, it is typically prudent to seek professional assistance as soon as possible. Taking action swiftly provides your accountant time to assess the situation and take action before you have a compliance lapse.
Some of the confusion regarding whether one needs to renew an ITIN comes from the previous regulatory regime under which ITIN renewals were processed. Under the old rules, the ITIN remained in effect so long as the taxpayer did not apply for and receive a Social Security number. This handling of ITINs is no longer relevant for most taxpayers and new rules determine whether you need to file for a new ITIN.
How Do I Know I Need to Renew my ITIN?
Under the new rules explained in IRS Notice 2016-48, there are several scenarios where a taxpayer will be required to renew their ITIN. To start, any taxpayer who has been issued an ITIN but has not used the ITIN on a federal tax return for at least three consecutive tax years will expire on December 31 of the third year of non-use. This rule applies to all ITINs regardless of the year of issuance. Taxpayers who fall into this scenario will need to apply for a new ITIN before filing their taxes.
There are a number of additional scenarios where an ITIN renewal will be required. Most of these scenarios are due to ITINs expiring due to age. The year the ITIN was originally issued will affect when the taxpayer must file for a renewal. A general breakdown of renewal dates includes:
- ITINs that were issued prior to 2008 are valid only until January 1, 2017. Taxpayers with ITINs from 2007 and earlier should consult with a tax professional to ensure their continued compliance.
- ITINs issued in 2008, will expire on January 1, 2018. These taxpayers have some time to address their compliance concerns, but engaging with an accountant or a tax professional as soon as possible may be prudent.
- ITINs issued in 2009 or 2010 are valid until January 1, 2019.
- ITINs issued during 2011 or 2012 will expire on January 1, 2020.
Once again, the three-year non-use rule supersedes these generalized expiration dates. If you have a question or are unsure if you need to renew your ITIN, it is wise to consult with a U.S. tax accountant or CPA.
What Happens If I Do Not Renew My ITIN?
The most noticeable immediate consequence of a failure to renew an expired ITIN will be potentially significantly increased processing times. Confusion and uncertainty regarding the status of the return are likely to cause unnecessary and preventable anxiety for the taxpayer. However, the failure to address ITIN concerns can also result in financial consequences. The IRS has warned that taxpayers who fail to renew an expired ITIN may be ineligible to receive certain tax credits. Unless the ITIN is renewed, the taxpayer may be barred from claiming the American Opportunity Tax Credit, Child Tax Credit, and other beneficial tax credits. Due to the potential for both administrative and financial complications, taxpayers are urged to address this issue as soon as possible.
Work with an Experienced US Tax Accountant to Address ITIN Concerns
For more than 30 years, Ted Kleinman has assisted taxpayers with an array of tax issues. At U.S. Tax Help, Ted can assist with ITIN issues and other tax concerns faced by U.S. taxpayers living in the United States and abroad. To schedule a confidential consult, please call Ted at (541) 923-0903 today.