Assessment of the IRS’s Individual Taxpayer Identification Number Program

Report Information

Summary

To determine tax credit eligibility, the IRS has systemic processes that review if ITINs are active (i.e., not expired) when a return is filed, if the ITIN was issued on or before the due date of the return, or if the credit requires an SSN to be eligible. For Processing Years 2023 and 2024, we identified 45,386 tax returns with approximately $172.4 million in credits claimed by ITIN holders who were ineligible to receive these credits. Of the $172.4 million in tax credits claimed, $142.8 million was refundable credits paid to the taxpayer. Refundable credits enable taxpayers to receive refunds even if they do not owe any income tax. Our review found:

• 294 tax returns claimed more than $637,000 in credits that were ineligible because the taxpayer or qualifying individual (e.g., a dependent) did not have an SSN. Of the $637,000 claimed, $303,000 was the refundable portion allowed by the IRS.
• 45,092 tax returns retroactively claimed about $171.7 million in credits. The IRS allowed $142.5 million for the refundable portions on 1,488 tax returns where taxpayers did not have an ITIN originally issued on or before the due date of the tax return and on 43,604 tax returns where taxpayers’ ITIN expired before the tax return due date. The IRS did not agree that they erroneously allowed credits on the 43,604 tax returns that retroactively claimed credits after the expired ITINs were renewed. The IRS stated it followed guidance (Notice 2016-48) that says the issuance date of a renewed ITIN is the original ITIN issuance date, not the renewal date. The IRS could have protected $138.8 million in Processing Years 2023 and 2024 if guidance was more aligned with the PATH Act’s intent to prevent retroactive claims for credits. Additionally, the IRS is planning to modernize the processing of ITIN applications by allowing taxpayers to self-authenticate their documents and electronically submit their applications. However, this is contingent upon information technology resources and other priorities across the organization. We also found that since September 2019, the IRS has not completed any on-site compliance reviews of its Certifying Acceptance Agents who assist individuals in the application process and are authorized to authenticate identification documentation. The IRS indicated that these reviews were delayed due to a lack of resources and are not mandatory.