Did you know Individual Taxpayer Identification Numbers can now expire? The tax team at LSL CPAs believes it is essential for you to know about the potential expiration of unused ITINs. If not used on a federal income tax return for five consecutive years, Individual Taxpayer Identification Numbers will now expire, potentially causing an individual taxpayer serious problems with the IRS.
Individual Taxpayer Identification Numbers Expire
Given the universal nature of the new policy, the IRS is doing its best to ease the burden on taxpayers. The focus of the new policy is not to be punitive, but to clean up a cluttered system. The goal of the entire new expiration program is to protect ITIN integrity by getting rid of millions of unused numbers. The new policy applies to any and all Individual Taxpayer Identification Numbers. It does not matter when the ITIN was issued or the specifics of a taxpayer’s situation. The new policy eventually will be applied across the board. What is truly fascinating is that only about 25% of the 21 million Individual Taxpayer Identification Numbers issued since the program began in 1996 are currently being used on tax returns. Given the millions of unused ITINs, the goal is to restore the balance by allowing them to expire and pass back into the IRS matrix. The Internal Revenue Service simply wants to clean up the system.
Original Individual Taxpayer Identification Numbers Policy
Although the original policy announced in 2012 was developed in conjunction with taxpayers, it proved untenable in reality. Although not designed to be punitive, it would have proven to be punitive if implemented as previously designed. As a result, the IRS has revised the policy as explained below in the following quotation from the IRS website… “Under the new policy:
- 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 U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
- To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season.
- A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.”
Individual Taxpayer Identification Numbers Help
If you are worried that you will be affected by the new policy because of unfiled income tax returns, please know that there is still time to act. By contacting the tax team at LSL CPAs, we can help you. In addition, if you are an American living abroad or a foreigner with a financial stake in the United States that calls for the paying of Federal income taxes and you haven’t filed for years, please contact the international tax consultants at LSL CPAs for support. Pursuant to U.S. Treasury Department Regulations, any federal tax advice in this article is not intended or written to be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. It is important to further note that this article presents only a partial view of the subject matter. It does not claim or attempt to be comprehensive or perfectly accurate. To learn more about the expiration of Individual Taxpayer Identification Numbers and how this IRS policy could affect you, please call LSL CPAs international tax accountant Yana Weaver at 714.569.1000.
