Many foreign nationals, non-resident aliens, and resident aliens are not aware of the fact that the US ITIN (Individual Taxpayer Identification Number) provided by the US Internal Revenue Service (IRS) has an expiry date. This can prove to be even more concerning when filing close to the deadline; during which applying for and obtaining a new ITIN can be difficult, and time consuming.
At AG Tax, we consider it necessary for all non-resident U.S. taxpayers to be informed about their ITIN expiration date. Our U.S. tax professionals have prepared a brief summary on ITINs and the associated expiration date, and renewal process to avoid this mishap.
What exactly is an ITIN?
Every individual subject to U.S. taxes has either a Social Security Number (SSN) or an ITIN. A SSN or ITIN serves as an identification number to differentiate each individual taxpayer to the IRS since people can often have the same name, but no two SSNs or ITINs are ever the same.
However, unlike the SSN which is permanent in nature; an ITIN is issued only to foreign or non-U.S. resident taxpayers who are subject to U.S. taxes because they have U.S.-sourced income, or are required to file a U.S. tax return, and come with an expiration date.
ITIN Validity Period
Earlier, ITINs issued in 2012 and before were valid indefinitely, and as per the 2013 policy change, any ITIN issued in 2013 and after was set to expire in 5 years.
However, recently the IRS modified this policy to require the expiry of only those ITINs which have not been used in any of the last 5 tax years rather than a mandatory expiration after 5 years.
Therefore, if a non-resident taxpayer has not used his/her ITIN to file a U.S. tax return in the last five years, he/she would need to reapply for an ITIN if one is required. This deactivation/expiration will only begin from 2016 onwards.
Why is this necessary?
As per IRS estimates, 21 million ITINs have been issued since the ITIN system was started in 1996, but only a quarter of these issued ITINs are still being used to file U.S. tax returns. It is possible that a person subject to taxes in one year may not be subject to U.S. taxes in the following year since a non-resident/foreigner is only subject to taxes in the years that he/she fulfills the conditions of being a ‘U.S. person’ for tax purposes.
The introduction of an expiration date will help the IRS keep a tab on which ITINs are still in use or expired, ensuring that only eligible ITINs are being used for legitimate tax purposes.
Renewal of ITIN
A taxpayer needs to file ‘Form W-7: Application for IRS Individual Taxpayer Identification Number’ to reapply for the ITIN, along with certain documents as proof.
That being said, every foreign/non-resident U.S. taxpayers should be aware of the ITIN validity period and expiration date so that they can act in time; avoid any delays in filing their U.S tax return and save themselves from additional expenses in the form of penalties, interest, and fines.
AG Tax LLP Can Help
If you have any tax-related queries or need assistance with tax planning or filing 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., Canadian, 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)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
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.