With all the hoopla over the debt ceiling debate and the stock market drop, few people noticed last week that the IRS just added more work for payroll departments.
The IRS said last week that it would require employers to manually enter the Taxpayer Identification Number (TIN) shown on W-2 forms for all taxpayers with Individual Taxpayer Identification Numbers (ITIN) who are reporting wages for tax year 2011.
They also stated that no software package should use an auto-population feature, regardless of the presence of an override feature, to populate the TIN on Forms W-2 for ITIN filers. Failure to comply with the new rules could result in a written reprimand, suspension, or even expulsion from the e-filing program.
An ITIN is a 9-digit number that always begins with 9 and has a range of 70-88 in the fourth and fifth digits. The IRS issues ITINs to individuals who are required to have a TIN, but who do not have, and are not eligible to obtain, a Social Security number (SSN).
Who needs an ITIN?
IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for Social Security numbers. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.
Other examples of individuals who need ITINs include:
• A nonresident alien required to file a U.S. tax return.
• A U.S. resident alien (based on days present in the United States) filing a U.S. tax return.
• A dependent or spouse of a U.S. citizen/resident alien.
• A dependent or spouse of a nonresident alien visa holder.
While this change does seem to lack some common sense, it is part of an ongoing IRS effort to crack down on taxpayer and tax return preparer fraud.