Congress’s Recent Changes To The ITIN Program Present Significant Challenges To Both Taxpayers And The IRS

Written by William Byrnes | Posted in IRS • Tax Changes

Individual Taxpayer Identification Numbers (ITIN) are needed by taxpayers who have a tax return filing requirement but are not eligible for a Social Security Number (SSN). In recent years, an average of 4.6 million taxpayers filed returns that included an ITIN. During the calendar year (CY) 2015, the IRS received approximately 870,000 Forms W-7, Application for IRS Individual Taxpayer Identification Number. When taxpayers cannot obtain an ITIN, they may experience financial hardship, miss out on tax benefits, and face business limitations.

Since 2003, the National Taxpayer Advocate has drawn attention to systemic problems in the IRS ITIN application procedures. In late 2015, Congress passed the Consolidated Appropriations Act, 2016 (hereinafter 2016 Act), which made some significant changes to the ITIN application procedures, as well as codified some previous requirements. The 2016 Act creates some limitations and restrictions that will likely make it more difficult for taxpayers to receive ITINs and claim certain tax benefits. However, the impact of the legislation largely depends on how the IRS interprets and implements the law through formal and informal guidance.

To date, the IRS has provided little information to the public regarding how it will interpret and implement the new requirements that are sweeping in their reach.

Under the 2016 Act, ITIN applicants in the United States must apply either in person to an IRS employee, in person to a CAA, or by mail. In essence, this requirement codifies the IRS’s prior administrative policy, while allowing the IRS the flexibility to enhance any of the existing options. For example, the IRS could increase locations in which IRS employees can certify ITIN applications or expand the CAA program. However, the IRS has historically declined to make any of these options more accessible.

TAS is statutorily required to assist taxpayers in resolving problems with the IRS, and works hundreds of cases related to ITINs each year. TAS also oversees the Low Income Taxpayer Clinics (LITCs), which are statutorily required to conduct outreach and education to taxpayers for whom English is a second language. LITCs are also expected to identify systemic issues and advocate for change to help low income taxpayers. Thus, LITCs are a valuable source of information and assistance for a vulnerable ITIN population and by excluding TAS in the ITIN discussion, the IRS excludes LITCs as an important resource.