ITIN Users Should Prepare for Revalidation Process

At the end of last year, Congress enacted legislation that requires some immigrants filing their taxes with an Individual Taxpayer Identification Number (ITIN) to revalidate. NCLR has made resources available to the community that includes the deadlines for ITIN filers to renew:

ITIN Revalidation Deadlines

While taxpayers with ITINs issued before 2008 will have to revalidate in the next year (by January 1, 2017), the Internal Revenue Service (IRS) has not shared details on that process and questions remain. For example:

  • Will immigrants who revalidate keep their same ITIN or receive a new number?
  • Will revalidation follow the same process as applying for a new ITIN or will there be a streamlined application?
  • Do immigrants revalidating their ITIN have to do so at the same time as filing a tax return or can it be filed separately to the IRS?

As we await answers to these questions and more, the IRS has stated publicly that taxpayers with ITINs that need to be revalidated should not do so with this year’s tax return. More information will be available in the coming weeks about how and when ITIN holders facing deadlines beginning on January 1, 2017 should proceed.

Until then, tax preparers should use this tax season to inform affected clients that they will need to prepare documents to revalidate shortly, but emphasize that a process is not yet in place.

Visit the nclr.org for additional resources.

This Week in Immigration Reform — Week Ending February 12

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Week Ending February 12

This week in immigration: NCLR Action Fund questions “program integrity” provisions in recent legislation; NCLR rolls out new resources for tax filers; new initiatives encourage citizens to register to vote and eligible permanent residents to become citizens; and immigration leaders team up to highlight American citizens who will be impacted by the upcoming Supreme Court decision.

NCLR kept the community informed with staff quoted in KCRW, Fox News Latino, Telemundo, CNET, StreamDaily TV, NBC News, Mashable, KSNV, and VideoInk.

Recent Congressional decisions leave many wondering if ‘program integrity’ really means ‘anti-immigrant’: When it comes to programs such as the Earned Income Tax Credit and subsidized school lunches, some have begun to ask whether “program integrity” is simply a more palatable way of saying “anti-immigrant.” The recently-passed $680 billion tax package contains a “program integrity” provision, which imposes additional requirements for some immigrants who pay their taxes with an Individual Taxpayer Identification Number (ITIN). Similarly, a bipartisan child nutrition reauthorization bill will increase verification requirements in the name of combatting “waste, fraud, and abuse.” These increased requirements and other changes are expected to adversely affect children with immigrant parents. An NCLR Action Fund blog post explores this disparity, calling on lawmakers to “resist the urge to further restrict immigrant eligibility for programs under the guise of ‘reducing improper payments’ and ‘program integrity.’”

NCLR distributes information for tax filers: Last year Congress passed legislation that made changes to certain tax credits and also created new “revalidation” requirements for some ITIN filers. At this time, little information is available about the revalidation process, but we know that if taxpayers do not revalidate their ITIN by the specified deadline, their taxes will be rejected and they could lose eligibility for the Child Tax Credit in that tax year. NCLR has created an infographic with the deadlines for revalidating ITINs as well as a blog explain what we know so far and a factsheet in English and Spanish. For more information, please contact Victoria Benner at vbenner@nclr.org

Voter registration: Now, there’s an app for that: Thanks to a partnership between NCLR and the digital media company mitú, voter registration is now available with a few taps on a smartphone. Latinos Vote (available for Android, iOS, and the web) provides voting requirements for a user’s home state and NCLR and mitú will engage with the user throughout the process, ensuring that as many potential voters as possible register to cast ballots in the upcoming elections. The partnership also highlights #WeAreAMERICA, a nonpartisan election initiative of mitú which seeks to engage and activate Latino youth across the country.

Eligible permanent residents who meet the requirements to become U.S. citizens, can receive information from a new initiative powered by the New Americans Campaign. The campaign, aptly named Citizenship 1-2-3, utilizes online tools, legal service providers, a texting platform, and a telephone hotline to provide support to those looking to begin the naturalization process.

Huffington Post op-ed calls for Supreme Court ruling to “stop the intimidation of American citizens”: Much has been written on the upcoming Supreme Court decision’s impact on the estimated 5 million immigrants who qualify for the President’s administrative relief programs. This week, a new Huffington Post op-ed looks at another group affected by the upcoming ruling: the 6.3 million Americans who are the spouses and children of undocumented immigrants. The vast majority – 5.3 million – of these Americans are children who know nothing besides what it means to be an American. “We are at a crossroads,” write authors Frank Sharry and Kica Matos. “We can take the path of demagoguery and hate, of marginalization and oppression. We can be one nation with two separate systems that creates a population of second-class citizens… Or we can be a country that affirms our values of love and family, equality and opportunity.”

To read about the steps that NCLR and its Affiliates and partners are doing to prepare for the implementation of administrative relief, check out our new blog post about the Ready America conference!

Have an Individual Taxpayer ID Number? There Are Some Changes You Need to Know About

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Photo: 401kcalculator.org

At the end of last year, Congress passed a $680 billion tax package that made a number of tax credits permanent, including 2009 improvements to the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), and extended others for varying periods of time.

The legislation also created new requirements for immigrants who file their taxes in April 2017 with an Individual Taxpayer Identification Number (ITIN) for income earned in 2016 and beyond.

As explained in a recent webinar (slide deck below), ITINs issued after December 31, 2012 will remain in effect unless a taxpayer does not file taxes for three consecutive years. In this case, the taxpayer will need to revalidate their number. Taxpayers with older ITINs will also need to revalidate based on a schedule specified in the law.

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Now, more than ever, it is critical that immigrants understand these requirements and their obligations. The extent to which the Internal Revenue Service plans to notify taxpayers of the revalidation process and schedule is not known. ITINs not only allow immigrants to pay taxes but are needed in many instances to open bank accounts, obtain driver’s licenses, and tax documents can be used to establish proof of residency. For these reasons and many more, NCLR asks its Affiliate Network and partners beyond to let friends, family, and clients know about the new revalidation timeline and process.

ITINs issued before January 1, 2013 will remain in effect until whichever comes first:

  • A taxpayer does not file for three consecutive years
  • ITINs issued before January 1, 2008 must revalidate by January 1, 2017
  • ITINs issued in 2008 must revalidate by January 1, 2018
  • ITINs issued in 2009 or 2010 must revalidate by January 1, 2019
  • ITINs issued in 2011 or 2012 must revalidate by January 1, 2020

To summarize: if any ITIN filer does not pay their taxes for three consecutive years, the taxpayer must revalidate their number. If taxpayers with older ITINs file each year, then they must revalidate by the date specified in the law.

The law specifies that taxpayers can apply for an ITIN in person, by mail, or at a Certified Acceptance Agent by providing original documents. The law does not specify what the process for revalidation will require. For example, it is not known if taxpayers will need to reapply for an ITIN by resubmitting all original documentation, if they will receive a new number or simply continue using their existing number, and more.

What is clear is that if a taxpayer does not understand these requirements, they could risk losing all of their CTC.

If someone with an ITIN issued before 2008 files their taxes in April 2017 without revalidating, those tax filings will be rejected. The taxpayer will need to revalidate their ITIN and refile their taxes. At this point, the individual will no longer be eligible for the CTC.

Decoding the Tax Deal: What It Means for Latinos and What Lies Ahead

Photo: http://401kcalculator.org, Creative Commons

Photo: http://401kcalculator.org, Creative Commons

With the New Year just around the corner, many of us are working to finish projects and tie up loose ends before heading off on vacation. Congress just did the same. Before leaving for the year, Congress passed a $680 billion tax deal making a number of credits permanent, including improvements to the refundable Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) that were set to expire in 2017.

The CTC and EITC help keep low-income working Latino families out of poverty. Because of this legislation, about four million Latino working families, including nine million children, will not lose any of their tax credits. The EITC amounts to as much as $6,143 per family, while the CTC can add up to $1,000 per child. These credits are especially valuable to the Latino community because more than 40 percent of Latino workers earn poverty-level wages.

Even as we celebrate this victory, we are concerned by a number of restrictions targeting hardworking immigrant taxpayers. Some of these changes in the law will keep some from receiving credits and make it harder for other immigrants to access credits for which they are eligible. For example, anyone who receives a new Social Security number (SSN), regardless of immigration status, cannot claim the EITC retroactively (a process called “look-back”) after April 15, 2016. Most other filers remain eligible to claim their EITC for up to three previous years. The previous law allowed people with new SSNs to claim the EITC retroactively as well. Another change targeting immigrants is the fact that anyone who receives a new Individual Taxpayer Identification Number (ITIN) cannot claim the CTC or AOTC retroactively after April 15, 2016.

Other changes may result in challenges for immigrants that depend on an Individual Taxpayer Identification Number (ITIN) to pay taxes and receive credits available to workers. Some of these changes are based on guidance on the ITIN application process issued by the Internal Revenue Service in 2012. Since then, there has been a drop in ITIN applications, leaving some to wonder whether the guidance is making it too hard to get an ITIN. One of these changes includes the requirement for new ITIN recipients to reapply on a recurring basis to keep their ITIN. There are processing delays for ITIN applications under the current system; adding ITIN revalidation could worsen those delays and keep hardworking Latino immigrants from credits available to them.

The dedication and work of NCLR Affiliates and partners helped to successfully push for Congressional action to make tax credits for working families permanent. More work lies ahead to make sure the Latino community can maximize credits under the new law. The lead up to tax season offers the opportunity to make sure Latinos know their eligibility and how to claim credits successfully. There will also be a need to help ensure the new ITIN requirements are implemented fairly and effectively. To that end, the Latino community should be prepared to work with the Treasury Department on implementation. These and other efforts will help make sure now-permanent tax credits continue to make a difference in the lives of millions who are working but still struggling to get by.

For more information about the new tax package and its impact on Latinos read our new fact sheet—The Congressional Tax Package and Latinos: What You Need to Know.

What Trump Gets All Wrong About Immigration and Taxes

(Cross-posted from the Citizens for Tax Justice Blog)

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Photo: Gage Skidmore.

Donald Trump’s recently released framework for immigration reform includes misleading statements about “illegal immigrants” claiming refundable tax credits. Trump claims that “illegal immigrants” received $4.2 billion in “free” tax credits in 2011 and proposes to pay for part of his immigration proposal by accepting the Treasury Inspector General for Tax Administration (TIGTA)’s “recommendation” to eliminate tax credit payments to these individuals. It’s hard to know where to start in deconstructing the inaccuracies in Trump’s statement.

First, the use of the word “free” is highly misleading, as undocumented immigrants do pay a significant amount in local, state, and federal taxes.  An analysis by the Institute on Taxation and Economic Policy (ITEP) estimated that in 2012, undocumented immigrants paid $11.8 billion in state and local taxes (including about $7 billion in sales and excise taxes, $3.6 billion in property taxes, and $1.1 billion in income taxes). On top of this, the Social Security Administration’s Office of the Chief Actuary estimated that in 2010, unauthorized workers (who may be undocumented or in the country legally but without permission to work) paid $12 billion in Social Security payroll taxes net of benefits received. Since most unauthorized workers are not eligible for Social Security benefits, this group only received approximately $1 billion in benefits for the $13 billion paid in.

Second, the $4.2 billion figure that Trump references is from a 2011 TIGTA report that actually states that families with an unauthorized worker received $4.2 billion in 2009 (not 2011) through the refundable portion of the Child Tax Credit (known as the Additional Child Tax Credit). While this may sound the same on the surface, there are a few things that should be noted. As the report explains, these credits were claimed by taxpayers using an Individual Taxpayer Identification Number (ITIN), which the IRS issues to individuals not eligible for a Social Security Number. ITINs are issued without regard to immigration status to people not authorized to work in the United States, so this group includes not just undocumented immigrants but also individuals who have immigrated legally but aren’t legally able to work.

Labor-Day-Banner-Photo-4Taxpayers using an ITIN are prohibited from receiving the Earned Income Tax Credit (EITC) but are allowed to claim the Child Tax Credit (CTC). Worth up to $1,000 per qualifying child, the CTC is intended to offset the costs of raising children. Families who owe less in taxes than their eligible Child Tax Credit amount can receive the difference through the Additional Child Tax Credit, which is paid out with their tax refund. Since the CTC is intended primarily to benefit children, it makes sense that it is the children’s immigration status, not the parents’, that qualifies a family to receive the credit, and a qualifying child can be a citizen, a U.S. national, or a resident alien. And although some portion of the $4.2 billion in Additional Child Tax Credits could be going to families with undocumented parents, nearly 80 percent of the children of undocumented immigrants are U.S. citizens.

It is also worth noting that the refundable tax credits like the EITC and CTC have immense benefits for the children in the families that receive them. There is a growing body of research showing that these credits improve educational and health outcomes for children and result in them working hard and having higher earnings as adults.

Third, while Trump says that his plan would “accept the recommendation” of TIGTA to eliminate tax credit payments to illegal immigrants, the 2012 TIGTA report that he references makes no such recommendation. In actuality, the report recommends that the IRS implement procedures to reduce the number of fraudulent ITIN applications that it approves. TIGTA’s main concern here is that people are using fraudulent documents to obtain an ITIN and using it to file fraudulent tax returns (e.g. claiming tax refunds for non-existent persons), not the use of ITINs by undocumented immigrants.

GuardRailWorkers_12_2_2014Finally, if the concern is the $4.2 billion revenue loss, Trump should look to comprehensive immigration reform that allows a path to citizenship for undocumented immigrants, which would actually increase revenues at the federal, state, and local levels. The Congressional Budget Office (CBO) estimated that the 2013 Senate comprehensive immigration reform bill would have decreased the deficit by $197 billion over ten years, as newly legal immigrants would pay $459 billion in additional taxes, while the increased government expenditures for benefits would only increase by $262 billion. Additionally, ITEP estimated that granting citizenship to all undocumented immigrants would raise more than $2.2 billion annually in state and local revenues. These revenue increases would occur because more immigrants would then be paying taxes on their income and because citizenship is likely to boost wages and therefore increase income, sales and property taxes. Trump might want to consider these benefits instead of spending all his time planning for that wall.

For more on Trump’s tax proposals, click here.