tax id

IRS Struggling With Immigrant Taxpayers

Internal Revenue Service (IRS) still seems to be struggling to curb the identity theft and taxpayer fraud, although it has made some significant changes in its procedure of accepting and verifying individual taxpayer identification numbers (ITIN). These interim changes were made effective in 2013 and now IRS is going to change a few rules again.

What is an ITIN? It is a number designated to US non-resident aliens who have a permit to live and work in USA but are ineligible to get a social security number. Individual taxpayer identification number is issued by IRS as a valid form of tax identity that enables immigrant taxpayers to file their tax returns in compliance with US tax laws.

IRS limits the use of Individual taxpayer identification number to tax purposes only; however, some banks, schools and insurance companies accept it as the proof of one’s identity. As a result, more and more people want them for purposes other than paying taxes. Statistics show that IRS has assigned millions of ITINs since 1996 and only one-fourth of the total, have been utilized to pay taxes.

According to a study made by Treasury Inspector General for Tax Administration (TIGTA) in 2012, the IRS was consistently responding to the ITIN applications without checking that those application requests were valid or not. That resulted in the issuance of large number of ITINs to those who are ineligible to get it. TIGTA identified it as a lack of attention to the process of assigning ITINs.

TIGTA estimated that with a lot of fake ITINs in hand, tax returns were processed and issued billions of dollars in refund claims. Over 16 million dollars were found to be directed towards just ten bank accounts as tax refunds.

These concerns about the identity theft and tax returns abuse led IRS to make changes in certain rules of ITIN application procedure. Initially IRS made the following changes:

  • In tax season 2015, IRS will limit the number of electronically deposited refunds for a single bank account. According to new rule, any subsequent refunds will be assigned by paper check and will be sent to taxpayers via mail.
  • Effective from 2013, individual taxpayer identification numbers will expire after five years. Taxpayers must apply for a new tax identity in the end of each term.

This second policy change encountered resistance from majority of tax payers as a result IRS made new announcements for the issuance of ITINs. According to new rules:

  • ITINs will expire if not used on a federal tax return within a period of five consecutive years. IRS will begin deactivating ITINs in 2016; this allows taxpayers to file at least one tax return in 2015 to keep their tax identity valid.

With this change in policy, IRS also made its criteria stricter regarding documentation required with ITIN applications. Now IRS demands taxpayers to submit their original passport or its copy certified by the issuing agency for identification purposes.

Although ITINs are being used for frauds and have been issued to many people who used them for non-tax purpose, the need to issue individual taxpayer identification numbers remains significant as it is essential to those who legally work in USA and pay taxes. IRS is working and needs to continue working out the ways to stop ITIN-related fraud, in the future.

If you want to apply for an, Individual Taxpayer Identification Number, or ITIN tax number and have any other questions, please feel free to contact us at 888-509-3616. If you have any suggestions please share those with us as well. Freedomtax ITIN Number has a professional team of IRS Certifying Acceptance Agents, and tax accounting professionals with more than 16 years of experience, helping immigrants with their ITIN application. Freedomtax can also help immigrant entrepreneurs incorporate a business in the USA. Freedomtax ITIN Tax Number Online services provides Quality, Professional Service with a Family Feel.

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