United States – IRS Reminds Taxpayers of Need to Renew Expiring ITINs

United States – IRS Reminds Taxpayers of Need to Renew

This GMS Flash Alert reports on an Internal Revenue Service (IRS) release reminding U.S. taxpayers about changes involving the individual taxpayer identification number (ITIN) program.

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Flash Alert 2016-111

On October 6, 2016, the U.S. Internal Revenue Service (IRS) issued a release1 to remind taxpayers affected by changes involving the individual taxpayer identification number (ITIN) program that they can now begin submitting their ITIN renewal applications to the IRS.  (For prior coverage, see GMS Flash Alert 2016-089, August 9, 2016.) 

Under legislation enacted in 2015, any ITIN not used on a federal income tax return at least once in the last three years will no longer be valid for use on federal tax returns as of January 1, 2017.  In addition, ITINs with the middle digits of 78 or 79 (xxx-78-xxxx; xxx-79-xxxx) need to be renewed even if the taxpayer has used it in the last three years.  

Only ITIN holders who need to file a tax return in 2017 need to renew their ITINs.  Taxpayers will need to have a current ITIN to file a federal return in 2017.

WHY THIS MATTERS

This reminder from the IRS is directed at taxpayers with an ITIN that is scheduled to expire and who will have a tax return filing obligation.  If the taxpayer or his or her agent submits the application package in the next few days or weeks, taxpayers with ITINs may avoid unnecessary delays and could experience smoother and faster processing. 

Background

The ITIN is a tax identification number that is used, generally, by individuals who need to file a tax return but are not eligible to obtain a social security number.  But the issued ITIN has, in effect, a fixed validity period.  The Notice provides guidance for renewing ITINs for taxpayers who hold ITINs that have expired or are set to expire based on the expiration schedule included in the Protecting Americans from Tax Hikes (PATH) Act of 2015.  Under the terms of the PATH Act, any ITIN 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 January 1, 2017.  

IR-2016-129

The IRS release (IR-2016-129) dated October 6, 2016 reiterates that taxpayers with ITINs that have not been used on a federal income tax return in the last three years will not be able to file a return unless their ITINs are renewed.  

The IRS cautions taxpayers who have ITINs that are scheduled to expire, and who need to file a tax return, not to delay. The IRS release addresses: (1) which taxpayers need to renew an ITIN; and (2) sets out how to renew an ITIN.  

Expiring ITINs

ITINs issued prior to January 1, 2013, will begin to expire as of January 1, 2017, based on a rolling schedule.  The first ITINs set to expire based on this schedule are ITINs with the fourth and fifth digits of 78 or 79.   

According to the release, the IRS recently mailed more than 300,000 letters (Letter 5821, also available in Spanish on www.IRS.gov) alerting taxpayers with ITINs with middle digits of 78 or 79 of the need to renew their ITINs.

Individuals who receive Letter 5821 are able to renew ITINs starting as of October 1, 2016.

FOOTNOTE

1  See IR-2016-129 (October 6, 2016) on the IRS website.

The above information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

The information contained in this newsletter was submitted by the KPMG International member firm in the United States.

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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