ITINs and Tax Law Changes: Current Rules

MEIC State and Local Training Individual Taxpayer Identification Numbers (ITINs) Current Rules November 22, 2019 1

Goals for This Session Obtain a basic understanding of ITINs Review the impact of tax law changes Discuss renewal procedures 2

ITINs The Basics An ITIN is a nine-digit number issued by the U.S. Internal Revenue Service (IRS) to individuals who are required for U.S. federal tax purposes to have a U.S. taxpayer identification number but who do not have and are not eligible to get a social security number (SSN). Form W-7 is used for the ITIN application. The application is usually submitted with a federal tax return; however, there are limited exceptions, such as opening an interest- bearing savings account. 3 3

ITINs the Basics The Earned Income Tax Credit is not available for filers or Qualifying Children with ITINs. For ITIN filers acquiring an SSN, the EITC will only be allowed for SSNs issued on or before the due date (including extension) of the return. The Child Tax Credit and American Opportunity Tax Credit can only be claimed by ITIN filers if the ITINs for the taxpayers are issued on or before the due date (including extension) of the return. 4 4

ITINs the Basics Beginning in 2018, children with ITINs cannot be claimed for the Child Tax Credit. A social security number is required. Beginning in 2018, for the $500 nonrefundable credit for a dependent not eligible for the Child Tax Credit, the dependent can have an ITIN but must be a U.S. Citizen, national, or resident of U.S. The rules in effect for before 2018 still apply in determining dependency exemptions. However, the IRS will not issue or renew ITINS for dependents residing in Canada or Mexico because they don t provide a tax benefit on a federal return. 5 5

Form W-7 Documentation The instructions for Form W-7 list the documents required to be submitted with a Form W-7. A passport is the only stand-alone document allowed (but see the exception on next slide). Absent a passport, two documents must be submitted, one to establish foreign status and one to establish identity. For dependents, the relationship to the taxpayer must now be listed on Form W-7. If not using a Certifying Acceptance Agent or going to an IRS Taxpayer Assistance Center, original documents, except for certain certified (not notarized) copies, must be submitted to the IRS. 6 6

Documentation - continued Passports that do not show a date of entry into the U.S. are no longer be accepted as a stand-alone identification document for dependents claimed as U.S. residents. (but see the exception below). U. S. medical records for dependents under age six, U. S. school records for dependents under age 18, or rental, bank statements, or utility bills for those 18 or over must accompany the passport. Exception: these rules do not apply to dependents of military members overseas. 7 7

Expiring ITINs Under the Protecting Americans from Tax Hikes (PATH) Act, the following ITINS will expire December 31, 2019. ITINs that have not been used on a federal tax return at least once in the last three consecutive years. ITINs with middle digits 83, 84, 85, 86, and 87. Affected taxpayers who expect to file a tax return in 2020 should submit a renewal application now. Note: middle digits 70,71,72,73,74,75,76,77,78, 79, 80, 81, and 82 previously expired. 8 8

Expiring ITINs Continued A tax return does not need to be submitted to renew an ITIN. ITINs issued only for information reporting purposes and not used on a tax return will not have to be renewed. 9 9

ITIN Assistance Free IRS Taxpayer Assistance Centers in Detroit, Flint, Grand Rapids, Marquette, Saginaw, Traverse City can verify and return most required documents. The ITIN applicant needs to prepare Form W-7 (and a tax return if needed) beforehand . Services are by appointment. Call 844-545-5640 for all locations. Accounting Aid Society provides free assistance in Detroit and Pontiac as a Certifying Acceptance Agent for taxpayers meeting Volunteer Income Tax Assistance guidelines typically income of $56,000 or less. 10 10

ITIN Assistance Fee Based Certifying Acceptance Agents can also assist by verifying and returning documents. They are listed at https://www.irs.gov/individuals/inter national-taxpayers/acceptance- agents-michigan 11 11

Thank you for your participation in this presentation! Email: mjhunt@accountingaidsociety.org, Marshall J. Hunt, CPA Accounting Aid Society 3031 West Grand Blvd., Suite 314 Detroit, MI 48202 313-956-1940, ext. 1208 Website: www.accountingaidsociety.org Accounting Aid Society is a partner agency of the United Way for Southeastern Michigan. 12