Monthly Archives: November 2016

Check Your ITIN because it could be Expired or Expiring Soon

Leave a reply

By: Coleman Jackson, Attorney, CPA
November 21, 2016

Check Your ITIN because it could be Expired or Expiring Soon

Individual Taxpayer Identification Number, otherwise known as (ITIN) allows taxpayers to meet their tax filing obligations who cannot obtain a Social Security Number.  An ITIN is typically used by nonresident foreigners , undocumented resident foreigners, dependents and spouses of U.S. Citizens and resident foreigners who cannot get a social security number, and nonresident students, professors or researchers filing a U.S. federal tax return or claiming an exception, and anyone else who has a tax reporting obligation but cannot obtain a social security number.  The ITIN, like a social security number, is a nine digit code.  The ITIN begins with the number 9 and has fourth and fifth digits ranging from 50-65, 70-88, 90-92, and 94-99.   These are the middle digits of the ITIN.   The ITIN does not grant the holder any legal rights to reside in the United States.  The ITIN does not grant the holder any right to work in the United States.  The ITIN is issued by the United States Treasury (IRS).  The ITIN is only used for tax reporting purposes.

ITIN holders beware!  Section 203 of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), which became law on December 18, 2015 made critical changes to U.S. Tax Law, 26 U.S.C. Section 6109 as it relates to the Individual Taxpayer Identification Number (ITIN) Program.  Because of these PATH Act changes, every ITIN holder must check their ITIN to determine whether it is expired or expiring soon.  The PATH Act made major changes in the ITIN Program which requires holders of ITINs to renew their ITIN.

Holders of unused ITINs must renew them or they will expire.  Any ITIN not used on a federal tax return for the last three (3) years.  Count back from the current year to the previous three tax reporting periods.  If it has been three years since the ITIN was used; it expires on January 1, 2017.  That means that if you hold an ITIN that was not used in 2015, 2014 or 2013; your ITIN is no longer valid and cannot be used when you file your 2016 federal tax return; unless, you timely renew it.  The IRS began accepting ITIN renewal applications on October 1, 2016 for taxpayers affected by the PATH Act.

ITINs issued before 2013 began expiring in 2016 on a rolling basis.  The mandatory renewal period for these ITINs is on what the IRS is calling a rolling basis.  The key numbers that triggers the expiration and mandatory renewal schedule as to when the pre-2013 ITIN renewal period began are the middle two digits of the ITIN.  For example, beginning October 1, 2016, ITIN holders with middle digits of 78 and 79 began renewing their ITIN. Every ITIN holder must examine their ITIN and the ITIN of family members (household members) to determine when their ITIN expires or expired based on the IRS rolling renewal schedule.

Holders of expired ITINs could have difficulty complying with U.S. tax laws.  They could be prohibited from claiming exemptions and dependents and so forth with expired ITINs.  Moreover, failure to timely file required federal tax returns carry serious consequences under U.S. tax laws, such as, civil negligence penalties, fraud penalties and potential criminal prosecution.  There could also be serious consequences under the Immigration and Nationality Act (INA) for failure to comply with U.S. federal tax laws (Internal Revenue Code).  Federal tax law abuse violates the terms of immigrant visas under the INA in certain circumstances.   ITIN holders must check their ITIN because the ITIN could be expired or expiring soon.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Third Parties Reporting Very Likely to Expose Non-Compliant Offshore Account Holders to IRS

Leave a reply

By:  Coleman Jackson, Attorney, CPA
November 15, 2016

Third Parties Reporting Very Likely to Expose Non-Compliant Offshore Account Holders to IRS

For approximately two years now, banks and other financial institutions, otherwise known as “Third Parties” located in foreign countries have been reporting account holders’ information, either directly to the Internal Revenue Service or indirectly through local governmental agencies pursuant to U.S. Treasury Department Intergovernmental agreements.  The logical conclusion is that as U.S. persons (U.S. Citizen & Green Card Holder) foreign bank account information is turned over to the U.S. Treasury or IRS, increasingly non-compliant offshore account holders will be fully known to the IRS. 

This third parties disclosure of offshore account holders to the IRS has increased the number of account holders who are taking advantage of the IRS Offshore Voluntary Disclosure Programs. The IRS Commissioner in recent days stated that,

“The IRS has passed several major milestones in our offshore efforts, collecting a combined $10 billion with 100,000 taxpayers coming back into compliance.  As we receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder.  The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”

The word to the wise non-complaint offshore account holder is to act responsibly because if caught, the penalties for non-compliance can be very very stiff… civil penalties and possibly criminal prosecution.  The taxpayer has only two options, and option (a) below is a foolish course of action: 

  1. Do nothing and increasingly expose themselves, their families and businesses to financial ruin and possible jail. This is the big-bird with its head in the sand option; or
  2. Seek acceptance into the appropriate IRS voluntary disclosure program while applicants are still being accepted.

Just think about it with head out of the sand!  The IRS reportedly collected $10 billion from 100,000 taxpayers who voluntarily disclosed their offshore accounts.  That is a lot of money; it would not be shocking if the IRS implement extremely aggressive collection procedures in their attempt to collect even more money from non-compliant offshore account holders exposed in the Third Parties disclosures.  If the IRS has the foreign account holders’ information; it is simply a matter of time and IRS resources and priorities as to how they bring offshore account holders into tax compliance; or pressure-encourage all non-complaint offshore account holders to voluntarily come into compliance with U.S. tax laws, including the Foreign Accounts Tax Compliance Act (FATCA); and the laws governing Foreign Bank and Financial Accounts, otherwise known as the FBAR.  Wise people have wisdom; but, fools act against wisdom.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.