Congress recently modified IRC Section 6109, resulting in significant changes to the Individual Taxpayer Identification (ITIN) program. The IRS created a short webinar presentation to help professionals understand these changes. The webinar covers the various changes made to the ITIN program including: New ITIN expiration policies; use of a passport as a stand-alone identification document for dependents; and expanded certification authority for Certifying Acceptance Agents or CAAs (more on CAA’s below). Some of these changes were implemented in September and October 2016. Additional changes go into effect January 1st, for the 2017 tax filing season.
Termination of Overseas CAA Program
I had read on another tax blog that the IRS will implement a new ITIN provision on January 1, 2017, which will eliminate the need for Certifying Acceptance Agents outside of the United States. As a result, in exercising certain authority, the IRS will terminate Acceptance Agent Agreements of organizations that are operating in foreign countries. Impacted organizations will be issued written notification by mail. Questions concerning this matter can be sent by email to ITINProgramOffice@irs.gov. I did not note any mention of this new provision in the IRS webinar. In addition, there was no mention of this change in the IRS announcement titled “New ITIN Acceptance Agent Program Changes” and dated November 16, 2016. Nevertheless, it appears that termination of overseas CAAs as of January 1 2017 is absolute fact.
I have heard from several tax colleagues who advised they have seen letters from the IRS to overseas CAAs on this matter.
Copied below is relevant text from one letter received by a tax colleague based in Israel:
“From: *ITIN Program Office [mailto:email@example.com]
Sent: Monday, December 12, 2016 4:42 PM
Subject: RE: New ITIN Regulations
Thank you for contacting the ITIN Program Office. We apologize for the delay in our response.
Under the PATH Act, an applicant who resides outside of the Unites States may submit their Form W-7 application by mail or to an employee of the Internal Revenue Service or a designee of the Secretary at a United States diplomatic mission or consular post. Currently, all IRS employees authorized to review and accept applications are located in the United States. The legislation eliminates the need to have AAs and CAAs located outside of the United States, as foreign applicants may no longer utilize their services. As a result, the IRS has issued termination notices by mail to all organizations located abroad.
Foreign applicants must mail Form W-7 to the IRS Campus in Austin, TX (see the Instructions for Form W-7 for the address) with original identification….”
I have written to the ITIN Program Office with queries for more information but have not yet received a reply. I will update this post accordingly.
UPDATE — December 19 2016
The “Tax Technical Corrections Act of 2016” may possibly save the day for overseas CAAs! See my blog post here
For those of you who are not very familiar with ITINs, a brief overview is provided below. The IRS page for Form W-7 and related ITIN information is here.
What is an ITIN and What is it Used For?
An ITIN is a nine-digit tax processing number issued by the IRS for federal tax reporting only. The ITIN is not intended to serve any other purpose. The ITIN does not authorize one to work in the US and it cannot be used as an identification number or for any purpose outside the US tax system.
Who Needs an ITIN?
The IRS issues ITINs to individuals who are required to have a US taxpayer identification number but who are not eligible to obtain a Social Security Number (SSN). If an individual is eligible to obtain a SSN, he should NOT be applying for an ITIN. ITINs are issued to so-called ‘resident aliens’ (e.g., one holding a US visa) and to ‘nonresident aliens’ since both may have a US tax filing or reporting requirement under the US tax laws. Generally, an ITIN will be issued if the individual has such a filing requirement.
Some examples of individuals who need ITINs include a nonresident alien required to file a US tax return. This can occur if the nonresident alien individual has certain types of US source income, such as rental income from a US property. Other individuals who need an ITIN include a foreign individual required to file a US tax return because he qualifies as a US “resident alien” based on the amount of time he has been physically present in the US. Someone who is listed on a tax return such as a spouse (in order to file a joint tax return), or a dependent (in order to claim a dependency exemption) and who is not eligible to obtain a valid SSN, must apply for an ITIN.
What is a Certifying Acceptance Agent?
A CAA is a person or an entity (business or organization) who, pursuant to a written agreement with the IRS, is authorized to assist individuals and other foreign persons who do not qualify for a Social Security Number but who still need a Taxpayer Identification Number (TIN) to process a Form 1040 and other tax schedules. The CAA facilitates the application process by reviewing the necessary documents and forwarding the completed forms to IRS.
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