New Policy: Unused Taxpayer ID Numbers Will Expire after Five Years

Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years, the IRS recently announced. In order to give all interested parties time to adjust to the new policy, the IRS added that it will not begin deactivating ITINs until 2016.

The new, more uniform policy applies to any ITIN — no matter when it was issued. The program to issue ITINs began in 1996. Since then, about 25 percent of the 21 million ITINs issued are being used on tax returns, the IRS explained.

What will the new policy accomplish? It will ensure that anyone who legitimately uses an ITIN for tax purposes can keep doing so, while at the same time, millions of unused ITINs will eventually expire.

Developed in consultation with taxpayers, their representatives and other stakeholders, the new policy replaces the existing one that went into effect on January 1, 2013.

Under the old policy, announced in November 2012, ITINs that were issued after January 1, 2013 would have automatically expired after five years, even if used properly and regularly by taxpayers. Though ITINs issued before 2013 were unaffected by that change, the IRS said at the time that it would explore options for deactivating or refreshing the information relating to these older ITINs.

The IRS noted that taxpayer ID numbers play a critical role. They assist in the collection of taxes from foreign nationals, resident and nonresident aliens and others who must file returns or pay taxes under U.S. law. ITINs are only issued to people who are not eligible to obtain a Social Security Number. They were designed specifically for tax administration purposes.

Under the new policy:

• An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
• An ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes numbers issued after January 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply beginning in 2018. (This was also the case under the old policy.)
• To ease the burden on taxpayers and to give other stakeholders time to adjust, the IRS won’t begin deactivating unused ITINs until 2016. The grace period will allow those with a valid ITIN, regardless of when it was issued, to submit a valid return during the next tax filing season since 2014 individual returns are due by April 15, 2015 (or October 15, 2015 if an extension is filed).
• If a taxpayer’s ID number has been deactivated and he or she needs to file a U.S. return, the individual can reapply using Form W-7. As with any ITIN application, original documents, such as passports or copies of other documents, must be submitted with the form.

The IRS stated it would release further details, including how and when taxpayers with expired ID numbers will be notified, at a later date.