In 2013, the U.S. Internal Revenue Service passed a policy to expire Individual Taxpayer Identifications Number (ITIN). Although the first legislation stated that the ITIN’s would expire after 5 years, this rule was further modified to consider only those ITINS as expired which had not been used in the last 3 tax years. The expiration and renewal process would begin from the year 2016 onwards. (To know more about ITIN expiration, read U.S. ITINs Now Come With an Expiration Date).
As taxpayers will need to renew their expired/expiring ITINs starting in October 2016, the IRS has recently announced certain changes to the ITIN renewal process and rolled out a schedule to assist taxpayers in complying with the renewal process. The following is a brief overview of the updated ITIN renewal process by AG Tax cross-border tax professionals. This article is intended for Canadian taxpayers who have an ITIN to file their cross-border U.S. income tax returns, and may need to renew their ITIN.
New Law For ITIN Renewal
As previously mentioned, non-resident U.S. taxpayers who obtained their ITIN in or after 2013, will need to renew their ITIN if they have not used it in the last three years to file a federal tax return, and taxpayers who obtained their ITIN before the year 2013 would need to renew their ITIN even though they have been using it regularly to file their federal U.S. income tax return.
The ITIN renewal process starts in October this year. Not complying with the regulation could delay the taxpayers expected refund, and in some cases may disqualify them from certain tax credits, such as the Child Tax Credit or the American Opportunity Tax Credit, until the ITIN is renewed.
ITIN Holders Who Will Be Subject To This Renewal
Currently, only those non-resident taxpayers who will be filing the U.S. federal income tax return for tax year 2016 in the year 2017 will need to renew their ITIN. Two key groups will be required to renew at this time:
- If the taxpayer has been filing returns and the ITIN was issued before 2013 the ITIN’s will begin expiring this year, and taxpayers will need to renew them on a rolling basis. The first ITINs that will expire under this schedule are those with middle digits of 78 and 79, i.e. ITIN 9XX-78-XXXX or ITIN 9XX-79-XXXX. Taxpayers falling in this category with ITIN middle digits 78 or 79 should begin expecting an ITIN renewal notice from the IRS. The IRS stated they will begin sending out mails to taxpayers falling in this category by August, 2016 regarding the renewal requirement and explanation of the renewal process. Taxpayers, who do not have middle digits as 78 or 79 for their ITIN will be notified at a later date, which is not yet confirmed. Additionally, if the above mentioned taxpayer’s family members also have ITINs, they may apply for ITIN renewal even if their ITIN does not have 78 or 79 as the middle digits; OR
- The ITIN has not been used for filing a federal tax return for any of the last three years, i.e. 2015, 2014, and 2013, the ITIN will no longer be valid. ITIN holders in this group who need to file a tax return next year will need to renew their ITINs.
ITIN Renewal Process
The renewal process will begin October 1, 2016. In order to renew the ITIN, taxpayers will need to file the most recent version of Form W-7, Application for IRS Individual Taxpayer Identification Number, and provide documents in support of their foreign status. The new version of the form will be issued in September of 2016. The taxpayer may either mail the completed Form W-7 along with supporting documents to the IRS, or visit their nearest IRS office or authorized Certified Acceptance Agents. (Read: ITINs For Canadians & Other Foreigners Subject To US Taxes for more information regarding applying for U.S. ITIN from a foreign country).
Additional Information for Dependents of Taxpayers Renewing ITIN
The IRS will be offering a family option for ITIN renewal. If any individual having an ITIN middle digit of 78 or 79 receives a renewal letter from the IRS, they can choose to renew the ITINs of all of their family members at the same time rather than applying for each separately. Family members include the taxpayer, the spouse and any dependents claimed on the tax return.
Normally, a certified copy of the passport is often the most commonly used document to substantiate non-U.S. residency, however, the IRS will no longer accept passports that do not include a date of entry. Non-resident taxpayers renewing their dependents’ ITINs would need to provide copies of the dependent’s U.S. medical records if they are below age 6, and school records for dependents above age 6 and below age 18 along with the certified copies of the passport. Dependents who are above age 18 can use rental receipts, bank statements, utility statements, or other similar documents which have their name and U.S. address mentioned on it as supporting documents.
This passport rule applies only to dependents of non-resident taxpayers belonging to countries other than Canada, Mexico, or dependents of military members overseas.
It is highly recommended that Canadian taxpayers who regularly file U.S. tax returns to report rental or other passive income should consider visiting their tax preparer to discuss expiration of their existing ITIN and application for renewal of those that are set to expire.
AG Tax LLP Can Help
If you have any questions regarding ITIN renewal, tax-related queries or need assistance with renewing your ITIN please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement Planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
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Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
