What Is Next For the Individual Taxpayer Identification Number?

by Jane Lamberson 16. July 2012 14:30
Just when we thought we understood the complex set of rules  the Internal Revenue Service (IRS) had issued for nonresident aliens to obtain a taxpayer identification number (ITIN),  the IRS has announced  yet more changes.  These changes could affect many of the [1] nonresident aliens selling real estate in Southwest Florida and across the country, as they may find it harder than ever to obtain an ITIN number to transact business in the United States. On June 22, 2012 the IRS issued IR 2012-62, changing how ITIN numbers are to be obtained through the end of 2012. These interim changes are designed to strengthen IRS procedures for issuing numbers and are part of a comprehensive review of the ITIN processing procedures.   The new rules require that either: a) original documents be sent to the IRS along with the W-7 application, or b) certified copies of the documents must be sent from the issuing agency.  A key change is that a certifying acceptance agent can no longer merely certify that the nonresidents’ original documents are a true copy. The certifying acceptance agent must now send the certified copies to the IRS with the W-7 application. With the new regulations a nonresident alien will need a certified copy of their passport (or other acceptable documents) from the issuing agency in order to: a) sell US real property; and, b) file for a withholding certificate to get a reduced withholding tax based on, for example, a maximum tax liability calculation.   This means they will need to get the certified copy BEFORE they come to the US to transact any business that requires an ITIN number if they want to file a W-7 application for an ITIN number. Without the certified copy from the issuing agency, the only way to complete the application is to file with the original documents. In summary, it appears the new regulations will require every nonresident alien to get a certified copy of the required documents needed for the ITIN application process. (Of course there is always the alternative of submitting original documents to the IRS.)  That way if the need for an ITIN number ever arises, the required documents will be available. Keep in mind that certified documents are only valid as long as they are not expired.  With the many uncertainties of the ITIN program, I anticipate we may see a whole new application process in the coming year. Until then nonresidents will have more of a headache obtaining an ITIN number than ever before. Jane E. Lamberson, CPA is with the Naples office of Urish Popeck & Company of Florida, LLC and practices extensively in the area of International Taxation.  She currently is a certifying agent for ITIN applications for the Internal Revenue Service. [1] A limited number of prospective applicants are exempt from the process - military spouses and dependents without social security numbers who need an ITIN, and nonresident aliens applying to claim treaty benefits.   
Categories: Advisory