The IRS is all geared to implement their new policy regarding the Individual Tax Identification Number (ITIN), but not before 2016. The IRS wants to give enough time to taxpayers and themselves. According to the new IRS policy regarding ITIN that became effective from January 1, 2013, ITINs that are not utilized on tax returns for five consecutive years will expire. Financial Buzz shares the details about the policy and how it impacts taxpayers:

“This new and uniform policy will be applicable to all ITINs, independent of a particular ITIN issue date. About one-fourth of 21 million ITINs, which were issued at the start of the program, are being utilized on tax returns. This new policy guarantees that any person who uses ITIN in a legitimate manner for purposes relating to tax can continue doing so, while unused ITINs will eventually expire.

“This new policy was created after consultation with the taxpayers and their representatives. Other stakeholders were also in the picture during the discussion. This new policy replaces the older one which became effective from January 1, 2013.

“The policy

“According to the existing policy, which was drafted in November, 2012, any ITIN issued post January, even if used properly by tax payers, will expire automatically. Although ITINs issued prior to 2013 remain unaffected by such developments, the IRS wanted to explore the many options available for refreshing or deactivating information related to the older ITINs.

“ITIN plays a critical role in the system of tax administration. It helps in collecting tax from both resident as well as non-resident aliens, foreign nationals and also others who have an obligation for payment or filing under American laws. ITINs are created particularly for the purpose of tax administration. They are issued exclusively to people who are ineligible for Social Security Numbers.

“According to the new policy, any ITIN will be discontinued in case of any tax payer failing to file tax returns for federal income for five successive tax years. An ITIN will be valid as long as the taxpayer is engaged in filing US tax returns. This is inclusive of ITINs issued post January 1, 2013. Such taxpayers will not face the compulsory ITIN expiry. Individuals can reapply in 2016.

However, the IRS has provided taxpayers and their representatives the much needed time to adjust to the new order. The service will not begin to deactivate the ITINs lying unused till 2016. Any person with a valid ITIN can still continue to file valid returns during the coming tax-filing season.”

IRS will begin to deactivate unused ITINs in 2016, so taxpayers with ITINs and their representatives still have time to conform to the new policies.