One of the ways you can provide outstanding service for your clients is by making them aware of tax-related issues before they become a problem. Many taxpayers who use Individual Taxpayer Identification Numbers or ITINs, are not aware that, as of 2016, they must be renewed periodically. Without a current ITIN, they will not be able to file taxes. Your clients will appreciate any help you can give them in remembering to renew and guiding them through that renewal process.
What is an ITIN?
An ITIN is a special number that is given to any taxpayer with a financial obligation to pay taxes in the United States but who may not have a social security number. Created in 1996, the ITIN program was created by the IRS to help the government collect as much as 13.7 billion each year in rightful taxes. An ITIN number has nine digits, just like a social security number, and it always begins with the number 9.
The IRS assigns ITINs to millions of people every year, including:
- Foreign nationals who are filing tax returns
- Dependents of US citizens or foreign nationals
- Spouses of US citizens or foreign nationals
- Foreign national students who qualify as US residents
- Those who receive taxable income from a US business but live outside the US
While those with ITINs are not eligible for every single tax benefit offered to those with social security numbers, they can participate in some tax programs such as the Child Tax Credit. ITINs can also help people open a bank account, get a driver’s license, and may help establish proof of residency.
Who needs to renew an ITIN?
An ITIN is only valid for three years and when it is due to expire, the IRS attempts to notify taxpayers that they must renew. If someone with an ITIN doesn’t renew an expiring number, they will not be able to use that ITIN with their upcoming federal tax return. The ITIN must be renewed by the deadline in order to be valid for the approaching tax year.
Any refunds that are filed with an expired ITIN will most likely be delayed, causing them to miss out on a timely refund or make them ineligible for certain tax credits. If your clients are not aware of when they need to renew their ITINs and they have not received a notice for renewal from the IRS, they may miss the opportunity. You can help them avoid these complications and ensure a smooth tax season when you know in advance when it’s time to renew your client’s ITIN.
How to renew an ITIN?
Your client may need your help in renewing their ITIN, especially if they are new to the country. There are three ways for your client to apply for a renewal. When choosing a way, always consider how much time your client has before the deadline as you decide which of these options will be the best choice for them. The IRS has up to 60 days to review and return your client's application, so it's best to submit the form as quickly as possible.
1. Your client can mail a completed W-7 to the IRS along with the required documentation. Proper documentation includes a passport or two of the following: driver’s license (either US or foreign), birth certificate, state ID, foreign voter registration card, visa from the Department of State, US military card, foreign military card, or school records (for those under 18). The original documents must be sent via certified mail, with the appropriate application forms, to the IRS for review.
2. If you are a Certified Acceptance Agent (CAA), you are authorized by the IRS to review your client's documentation and ensure that their ITIN application is correct before you submit it to the IRS directly for processing. A key benefit of being a CAA is that you can certify copies of passports and birth certificates so that your client doesn't have to mail the original documents to the IRS.
3. If you have ample time before the deadline, your client can make an appointment at an IRS Taxpayer Assistance Center to show documentation instead of mailing their sensitive documents to the IRS. Check where the Taxpayer Assistance Centers are in your state here.
Of the three renewal options listed above, two and three are recommended as best practices so your clients will not have to submit original identification documents or certified copies of these identification documents from the issuing agency, when mailing in Form W-7. Since the IRS began imposing the renewal rules in 2016, many people have experienced difficulty obtaining certified copies of their passports from their home country agencies. Additionally, most people do not want to submit their original identification documents through the mail.
When the application is complete, it generally takes anywhere from seven to 11 weeks for the IRS to receive it, process it, and send out a letter with the assigned tax identification number. Your clients should be reminded that an ITIN doesn’t actually authorize work in the United States and is not a valid identification beyond tax purposes. Also, the ITIN is not a substitute for a social security number and a person is not eligible for benefits therein.
Want more information on IRS-issued identification numbers? Check out this blog post.