By Ken Berry
Do you remember that Individual Taxpayer Identification Number (ITIN) you helped a client attain a while back? Wipe it from your memory. The IRS has just announced that ITINs won't last forever anymore. They will now expire after five years (IR-2012-98, November 29, 2012).
The change is part of an ongoing effort by the IRS to deter fraud and improve the refund process. It complements previously announced modifications that were implemented on an interim basis after an exhaustive study by the IRS. While some of the rules are more stringent, others will make life easier for taxpayers.
"Our review allowed us to evaluate the program and gather feedback to make needed adjustments," said IRS Acting Commissioner Steven Miller. "We believe the final rules balance the need for greater integrity for the ITIN and refund processes while minimizing the impact on taxpayers."
ITINs are critical to the administration and collection of taxes from foreign nationals, resident and nonresident aliens, and others who face filing or payment obligations under US law. They are only issued to people who aren't eligible to obtain a Social Security Number. In addition to requiring original documentation or copies certified by the issuing agency, the IRS will no longer accept notarized copies of documents for ITINs. Most of the other interim guidelines established earlier in the year were made permanent. The IRS believes that these changes will provide more flexibility for people seeking ITINs while providing stronger protections.
The change to a five-year expiration period is intended to ensure that ITINs are being used for legitimate tax purposes. Taxpayers who still need an ITIN will be able to reapply at the end of the expiration period. The IRS will investigate various options, through engagement with interested groups, for deactivating or refreshing the information relating to previously issued
Certifying Acceptance Agents (CAAs), who may serve as intermediaries in the ITIN application process, will be able to review original documents or copies certified by the issuing agency, but they will be subject to new safeguards. CAAs must certify to the IRS that they have verified the authenticity of the documents supporting the ITIN application. For certain ITIN applicants, this means they won't have to mail original documents, such as birth certificates and passports.
With respect to dependent children, ITIN applications submitted to the IRS by a CAA will continue to be required to include original documentation. For children under age six, one of the documents may include original medical records. For school-age children, the documentation can include original, current-year school records, such as a report card. However, the IRS promises to set up Taxpayer Assistance Centers where documents of dependents can be reviewed so taxpayers don't have to part with originals, as well as establishing Tax Attaché offices in London, Paris, Beijing, and Frankfurt, and other sites where documents may be reviewed.
CAAs will also have to comply with tougher due diligence standards to verify the accuracy of supporting documentation. For the first time, only those covered under Circular 230 will be eligible to serve as CAAs. Exceptions are allowed for CAA applicants from financial institutions, gaming facilities, Low-Income Taxpayer Clinics, and Volunteer Income Tax Assistance (VITA) centers. CAAs will be required to take formal forensic training to help them identify legitimate identification documents. The IRS also plans greater oversight and compliance activities with CAAs in order to safeguard the ITIN process.
As announced previously, certain categories of applicants aren't affected by these documentation changes, including:
- Spouses and dependents of US military personnel who need ITINs, and
- Nonresident aliens applying for ITINs for claiming tax treaty benefits.
The IRS has emphasized that it will continue to monitor and work with interested stakeholders on the ITIN process. It intends to make appropriate adjustments to ensure that the process works in a fair, balanced fashion that meets the needs of taxpayers and tax administration. Individuals or organizations that would like to comment on these procedures can submit an e-mail to ITINProgramOffice@irs.gov
The new finalized procedures are effective January 1, 2013. Therefore, they will apply to ITIN applications that are submitted along with a taxpayer's 2012 income tax return.