In an effort to curb of identity theft and taxpayer fraud, the Internal Revenue Service (IRS) has decided to change its procedures concerning the acceptance and verification of Individual Taxpayer Identification Number (ITIN). What is an ITIN? This number is the designated form of identification for those taxpayers ineligible for a Social Security Number. According to the IRS, the changes are hoped to deter taxpayer fraud in the form of fraudulent tax returns.
Despite the altruistic undertones of the updates, tax professionals were not overly enthusiastic at the outset. Though tax professionals concurred with the IRS that changes in the way ITIN’s were generated were needed, they felt (at least in the first round of changes) the timing was less than fortuitous (they occurred during tax preparation season).
Interim guidelines are now (mostly) permanent and among the changes one significant difference is that ITINs now expire after five years. Another level of verification added is the requirement that applications be submitted with original documentation (or copies certified by the issuing agency), a departure from the previous IRS practice of accepting documents that were not notarized copies of documents.
To support obtaining the proper ID validation in more than a handful of remote locations, “trusted outlets” approved by the IRS to review original documents will be allowed. By trusted, they mean really trusted. Among those agencies that are IRS approved are Certifying Acceptance Agents (CAAs). Furthermore, CAAs are now limited to agencies subject to Circular 230 – which narrows the pool to certified public accounts (CPAs), attorneys, enrolled agents (EAs), actuaries, or retirement plan agents and registered tax return preparers (RTRPs) (for the most part).
Individuals applying for ITINs will continue to be served by IRS ITIN centralized sites, some key IRS Taxpayer Assistance Centers (TACs) or for those overseas the appropriate proxy agency – the nearest U.S. Tax Attaché (e.g., London, Beijing , Paris, and Frankfurt). Low-Income Taxpayer Clinics and Volunteer Income Tax Assistance (VITA) Centers are also staffed with CAAs. Foreign students can obtain certification at any Student Exchange Visitors Program (SEVP). Exceptions to the new guidelines include: U.S. military spouses and dependents, non-resident aliens seeking an ITIN for the purposes of tax treaty benefits, and Student Exchange Visitors Program (SEVP) participants.
Heightened security measures for CAAs require using IRS Form 14194 and certifying they have properly reviewed the aforementioned acceptable forms of documentation by one of two methods: 1) either face-to-face, or 2) through a live video interviews (e.g. by Skype).
In a webinar promoted by the ITIN Policy Section, they discuss the rationale behind the changes, the new five-year expiration period, ITIN changes and certification, the CAA application process, and the new training requirements. The webinar also details the training requirements for foreign and domestic CAAs. For those who have successfully completed the training, the IRS recommends specific tools to authenticate someone’s identification, among them, the latest edition of the ID Checking Guide for the U.S. and Canada.
These stricter identity verification controls, including specialized forensic training, are the next wave of measures the IRS is taking to ensure taxpayer identities and refunds are protected from those who would prey upon them. And in an age when more and more personal transactions are conducted online, and identity theft continues to rise, they are a welcome preemptive strike for the security of private individuals and their hard-won tax returns.