ITIN application changes.

In Notice 2004-1, the IRS took steps to strengthen controls over the issuance of individual taxpayer identification numbers (ITINs). It revised its procedures for issuing ITINs, in part, by revising Form W-7, Application for IRS Individual Taxpayer Identification Number.

Overview

ITINs are issued only to individuals required to have a U.S. taxpayer identification number for U.S. tax purposes, but not eligible to obtain a Social Security number. ITINs are for Federal tax purposes only; they do not entitle a recipient to Social Security benefits, change immigration status or the right to work in the U.S., and are not valid identification outside the tax system. Tax returns tiled using ITIN numbers cannot claim the earned income credit.

The IRS has issued 7 million ITINs since 1996; only about 75% of these have been used for return purposes. The remaining 25% may have been requested solely to serve as a form of identification; like a Social Security number, an ITIN is a nine-digit number (although all ITINs begin with a "9" and have a "7" or "8" as the fourth digit), However, because ITINs are strictly for tax processing, the IRS does not apply the same standards as do agencies that provide genuine identity certification. The IRS has taken these steps to help ensure that ITINs are used for their intended purpose; consequently, it updated Form W-7.

Program Changes

The IRS made the following changes to the ITIN program:

1. All new ITIN applicants have to show a Federal tax purpose for seeking one. For those needing an ITIN to meet their income tax filing obligations, they must file Form W-7 with their original Federal tax return.

2. The IRS will reject applications without proof of need for tax administration purposes.

3. The IRS has reduced to 13 from 40 the number of documents it will accept as proof of identity to obtain an ITIN. A passport is the only document accepted for both identity and foreign status purposes. If a passport is not used, at least two other current documents with expiration dates from a prescribed list in the Form W-7 instructions must be used; at least one of those must contain a recent photograph to support the claim of foreign status.

4. The actual ITIN identification has been changed from a card to an authorization letter, to avoid any possible similarities with a Social Security card.

5. All Form W-7 applications (and the attached Federal tax returns, when required), along with the identification documents, are filed with the IRS's ITIN unit in Pennsylvania. The IRS will assign an ITIN and then process the actual tax return as if it were filed at the address listed in the instructions for that return. Only one copy of the tax return is to be filed.

For individuals needing further information, one option is to use an Acceptance Agent. These agents have been authorized by the IRS to assist individuals in obtaining ITINs. They review applicants' documentation, complete a certificate of accuracy and forward the certificate and application to the IRS for processing; they can charge for their services. The IRS website (www.irs.gov) contains a link to a list of these agents, by city and state.

Conclusion

The IRS has stated it will continue to review this process to issue ITINs only when they are for the intended purposes. A public connect period runs until June 15, 2004, on the revised form and application process.

FROM TRENTON S. OIMSTEAD, CPA, CONTROLLER, D.C. INDUSTRIES, INC., WATERLOO, IA