United States: IRS begins to implement ITIN renewal and expiration processes

Aug 2016

The Internal Revenue Service (IRS) issued Notice 2016-48, Implementation of PATH Act ITIN Provi-sions on August 4, 2016. This notice explains the changes made to the Individual Taxpayer Identifica-tion Number (ITIN) program by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) en-acted on 18 December 2015.

The PATH Act requires that ITINs, not used on a federal tax return at least once in the last three years, be renewed and provides for the expiration of ITINs issued prior to 2013 on a rolling schedule. The renewal process differs from the original application process in that the Form W-7, Application for IRS Individual Taxpayer Identification Number, is not required to be submitted together with a tax return (original or certified documents establishing foreign status and identity are still required.)

Beginning this summer, the IRS will send a Letter 5821 regarding the required ITIN renewal to indi-viduals holding ITINs with the middle digits 78 or 79 if the ITIN was used for a taxpayer or a depend-ent on a US income tax return in any of the last three consecutive tax years. The IRS will begin pro-cessing ITIN renewal applications received from these individuals on 1 October 2016. Once renewed, an ITIN will remain in effect unless it is not used on a tax return for three consecutive years. ITINs with middle digits other than 78 or 79 that have been in use within the last three consecutive tax years should not be renewed at this time and require no immediate action from the ITIN holder.

US income tax returns filed by individuals with an expired ITIN will be accepted by the IRS; however there may be a delay in processing these returns, and certain credits, such as the Child Tax Credit and the America Opportunity Tax Credit, may not be allowed unless the ITIN is renewed. This could result in a reduced refund or additional penalties and interest.