IR 2019-118 takes a page out of the requirement for tax professionals to obtain a Personal Tax Identification Number (PTIN). I remember getting mine when they were first offered back in 1999. However, when the IRS decided they were going to license tax professionals, they began charging for PTINs. After the Loving case and subsequent lawsuit to end this practice, the agency is again allowed to do this. Wrap your head around this one: IR 2019-118 addresses the need to renew an Individual Tax Identification Number (ITIN), which is for those taxpayers with no SSN but a US tax filing obligation.
Let’s say I live in Canada, and I have a two vacation rentals in the US. The incentive for me to file an American tax return would be that 30 percent of any funds I took from the rentals and transferred to Canada would be withheld for US taxes. As a Canadian citizen, I have to pay tax on worldwide income, just like a US citizen. In the US, I need to file a 1040-NR to reconcile my income and expenses to the money I received and the taxes withheld. I receive a Foreign Tax Credit for any monies I paid in Canada; however, they do not outweigh the taxes in the US. Effectively, I have paid tax twice on the same money.
In light of this, I have to ask: Why would anyone renew an ITIN?
Presumably, if an ITIN isn’t renewed, the identity that was associated with it is wiped out, and the number can be used again. It isn’t as if the IRS is forcing a taxpayer to renew anything. In fact, there was a relatively large exodus of expats giving up their US citizenship a few years ago because of the oppressive tax regime. And if I was a foreigner that was in the situation as my extreme example, why would I care about renewing my ITIN when I don’t want to pay the additional taxes anyway? I'd like to note I don't get the same choice with the PTIN if I want to continue preparing tax returns.
In fact, the only time that I can see where it would be beneficial to renew an ITIN would be for a dependent born on a US military base overseas. Contrary to popular belief, these aren't American soil, so a child born during a soldier's deployment can only become a citizen through naturalization. In order to be claimed as a dependent, the child would need an ITIN.
So if the IRS wants to try to charge people to renew their ITINs, good luck. I'd like to see how that plan works out.
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as...