The IRS is making changes to the procedures for issuing Individual Taxpayer Identification Numbers for the rest of the year. The application process is going to be more challenging in hopes to reduce the amount of ITIN fraud.
ITINs are designed for tax administration purposes and are assigned to people who are not eligible for Social Security Numbers. Over the years, ITINs have been criticized for being used by illegal immigrants and undocumented workers. Last year the Treasury Inspector General for Tax Administration reported that $4.2 billion in refundable tax credits such as the Additional Child Tax Credit in 2010 were paid to individuals who were not authorized to work in the United States.
Effective immediately the IRS is requiring the original birth certificates, passports, or certified copes of these documents to be submitted with the ITIN application as it goes through this interim period. Notarized copies of these documents will not be acceptable for the ITIN application. Certifying acceptance agents will not be able to submit the ITIN application unless they attach the original documents or copies of originals that have been certified by the agency. The goal of these procedures is to strengthen the ability to fight fraud and abuse that is taking place with this application process.
Since the April 17 filing deadline has passed, the IRS suspects that a small number of taxpayers will need an ITIN between now and the end of the year. Typically, an ITIN is issued during the tax filing season with submission of a 1040 and most applicants submit a Form W-7 to obtain an ITIN.
The procedures for the ITIN request will be in place before the 2013 filing season. This summer the IRS is going to be looking for suggestions on what the permanent process should be and they will be seeking advice from stakeholders. While trying to minimize obstacles to taxpayers reporting their income the IRS will try to make long-term improvements to this program. The IRS is aware that the ITINs play a serious role in the tax administration process.
People who require an ITIN during this interim time will have to submit by mail their original documents or certified copies. The IRS has walk-in sites where people can submit their documents which then will be forwarded to the ITIN centralized site for final processing.
Spouses and dependents of US military personnel who need ITINS are not impacted by these changes. Taxpayers with questions should follow the new procedures and they should refer to Form W-7 instructions which include:
- Military spouses and dependents without an SSN who need an ITIN (Military spouses use box e on Form W-7 and dependents use box d). Exceptions to the new interim document standards will be made for military family members satisfying the documentation requirements by providing a copy of the spouse or parent’s U.S. military identification, or applying from an overseas APO/FPO address.
- Nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits (use boxes a and h on Form W-7). Non-resident alien applicants generally need ITINs for reasons besides filing a U.S. tax return. This is necessary for nonresident aliens who may be subject to third-party withholding for various income, such as certain gaming winnings or pension income, or need an ITIN for information reporting purposes. While existing documentation standards will be maintained only for these applicants, scrutiny of the documents will be heightened. ITIN applications of this category that are accompanied by a US tax return will be subject to the new interim document standards.