Individual Tax Identification Number or ITIN is soon going to expire for many taxpayers, and IRS has issued a reminder on 18th October 2016 that taxpayers whose ITIN is expiring can begin submitting their ITIN renewal applications to the IRS. This post is explaining the importance of ITIN , why the ITIN expired for some .
Why You Need an ITIN ?
Everyone who files a tax return must be identified by a unique number. Social Security Number is one of the identifcation number used to files tax return . But there are individuals who can not be issued SSN for various reasons , bu who are required to file tax return or forms under Internal Revenue Code.
The IRS issues a unique number called Individual Taxpayer Identification Number (ITIN) to individuals so that they can also comply with various kinds of reporting requirements , including filing of tax return . So one must obtain an ITIN if:
1. You do not have an SSN and are not eligible to obtain one.
2. You identify with one of the following categories.
• Nonresident alien who is required to file a U.S. tax return.
• U.S. resident alien who is (based on days present in the United States) filing a U.S. tax return.
• Dependent or spouse of a U.S. citizen/resident alien.
• Dependent or spouse of a nonresident alien visa holder
Why ITIN expired ?
Section 203 of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted on December 18, 2015, modified section 6109 of the Internal Revenue Code . Section 6109 is law related to issue of Individual Taxpayer Identification Number (ITIN) . As per the PATH Act , the ITIN expires in following circumstances :
If the ITIN was issued before 2013 will begin expiring this year, starting with those with middle digits of 78 and 79 (Example: (9XX-78-XXXX).
If ITIN is not used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return as of Jan. 1, 2017.
All expired ITINs must be renewed before being used on a U.S. tax return. No action is needed by ITIN holders who don’t need to file a tax return next year. Also, there are new documentation requirements when applying for or renewing an ITIN for certain dependents. So , you must have understood clearly who needs to renew ITIN ?
Only taxpayers who need to file a tax return in 2017 need to renew their ITINs. . Others do not need to take any action.
Can You File Tax Return Even if Not Having a New ITIN ?
Yes, there is no problem as far as filing tax return is concerned with the old ITIN . But since old ITIN expired , following consequances may follow as per IRS communication
Returns filed by these individuals 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 American Opportunity Tax Credit, may not be allowed unless the ITIN is renewed. This could result in a reduced refund or additional penalties and interest. The IRS will notify these filers about the delay and any reduction in refunds and credits claimed and will inform them about the need to file Form W-7 to renew their ITIN.
To sum up the consequences , these are
- Delay in processing your return
- Certain credits may not be allowed
- Reduced refund