According to the Internal Revenue Service (IRS), more than 1 million Individual Taxpayer Identification Numbers (ITINs) will expire December 31, 2020. The IRS recently reminded individuals that per the Protecting Americans from Tax Hikes Act, “ITINs that have not been used on a federal tax return at least once in the last three consecutive years and those issued before 2013 will expire.”¹ For those affected individuals with expiring ITINs, the IRS is urging them to “renew their number ASAP” to avoid processing and refund delays when they file their tax returns next year.²
Generally, the IRS requires taxpayer identifying numbers on all tax and information returns and documents filed with the IRS.3 An ITIN is a tax identifying number issued by the IRS and has the same form as a Social Security number (SSN)—i.e., 000-00-0000. Anyone who is ineligible to obtain a SSN and is required to provide a taxpayer identification number must apply for an ITIN from the IRS. ITINs are intended for federal tax purposes only.
Significantly, for individuals with ITINs that were issued before January 1, 2013, their ITINs expire on a rolling basis (beginning January 1, 2017), as provided by the IRS’s “rolling schedule” found in Notice 2016-48.⁴ And this rolling basis expiration applies regardless of whether the ITINs have been used on returns in the last three years.⁵ Moreover, ITINs are also subject to expiration on the earlier of: (1) the “applicable date,” or (2) if a tax return is not filed for three consecutive taxable years “at least one of which ends after December 18, 2015, the due date for the return of tax for such third consecutive taxable year.”⁶
If you are a taxpayer with an expiring ITIN and you expect to have a filing requirement in 2021—then you must submit a renewal application.
On August 17, 2020, the IRS announced that late this summer it would begin sending out Notice CP48, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return. These notices are intended to remind affected taxpayers to renew their expiring ITINs and provide information for taxpayers as to how to renew their ITINs if it is going to be used on U.S. tax return filed in tax year 2021.
Even more recently, on August 27, 2020, the IRS released its Tax Tip 2020-110, reiterating that individuals should “renew their number ASAP” to avoid processing and refund delays when they file their 2020 tax returns.⁷ The IRS emphasized that the ITINs expiring on December 31, 2020, are those ITINs: (1) with middle digits 88, and (2) with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99, if assigned prior to 2013 and not renewed yet.
In an IRS FAQ, the IRS very succinctly explained that the ITINS subject to expiration at the end of this year are:
ITINs that have not been used on a tax return for tax years 2017, 2018, or 2019 will expire December 31, 2020. Additionally, ITINs with middle digits 88 (For example: 9NN-88-NNNN) will expire December 31, 2020. Those with middle digits 90, 91, 92, 94, 95, 96, 97, 98, or 99, that were assigned before 2013 and have not already been renewed, will also expire at the end of this year.⁸
The IRS also clarified that affected taxpayers with an expiring ITIN have a “Family Option”—i.e., the option to renew ITINs for the entire family at once. Taxpayers who received an IRS renewal letter can choose to renew the family’s ITINs together, even if other family members’ ITINs have not been identified for expiration. The IRS noted that “family members” include “the tax filer, spouse and any dependents claimed on the tax return.”⁹
In order to renew an ITIN, a taxpayer is required to complete a Form W-7, Application for IRS Individual Taxpayer Identification Number, and submit all required documentation. Along with their application, the taxpayer must provide a reason for needing an ITIN. Note that spouses and dependents can only renew their ITIN either (1) upon filing an individual tax return, or (2) when another person files a tax return and claims them for an allowable tax benefit.
It is imperative that ITIN renewal applicants timely submit their application by the end of the year. If an applicant uses an expired ITIN on their U.S. tax return, it will be processed and treated as timely filed, however, it will process without any exemptions and/or credits claimed and no refund paid at that time.¹⁰ The IRS will give notice to the cause of delay and the expired ITIN.
The renewal application process can be technical and cumbersome. It may require careful selection and review of various documents needed to satisfy such things as proof of foreign status and identity and dependent requirements. Our tax professionals have experience with efficiently navigating clients through the application process.