Tax Professionals Face IRS Challenges as They Try to Help Illegal Immigrants File Tax Returns
Salinas, CA (PRWEB) September 09, 2013 -- In an email to 50,000 email subscribers, Latino Tax Professionals Association (LTPA) Executive Director Carlos C. Lopez, EA writes, "Thank you, to all of you who responded to our email blast asking you to share your ITIN challenges with us. There were many common themes that we were able to identify so we could discuss them with the leadership of the ITIN department."
Latino Tax Professionals Association recommends taking time to watch this video from the IRS explaining the new ITIN procedures that were placed in service on January 1, 2013. It was originally presented on February 26, 2013 and is very informative.
http://www.irsvideos.gov/ITIN2013ProgramChanges/
Latino Tax Professionals Association had the opportunity to meet with Sharon Bradley, Chief, ITIN Policy Section August 21, 2013 at the IRS National Tax Forum in Atlanta, GA. The meeting was very productive and Carlos C. Lopez, EA would like to share what was learned.
Latino Tax Professionals Association asked Ms. Bradley, what can our members do to make the ITIN processing more effective and less burdensome for all parties involved: the IRS, the tax preparer and of course the taxpayers?
Name mismatches. The IRS told Latino Tax Professionals Association this is the number one reason ITIN applications are being rejected. As practitioners we need to make sure that our W-7 applications have the same name on the W7 application that is on the tax return being submitted. If you abbreviate names, use initials, leave off the second last name on the tax return or the W-7 that are being submitted, IRS employees do not know if it is the same person on the application or the tax return.
W-2 Issues. Many clients who need an ITIN have worked under a different name and a different social security number that is not their legal name or social security number. When a W-7 is submitted with a tax return and W-2's the names should all be the same. The IRS wants to make sure that the person reporting W-2 income is the income they earned. Remember the purpose of the ITIN is for foreign individuals to report their income.
How do you help your clients solve this challenge? Workers can ask their employer(s) to correct the name on the W-2 to match the legal name they are using on the W-7 and the tax return. Of course, many clients do not want to ask their employer to change their records for fear of being dismissed for submitting inaccurate information.
If workers are depositing their wages into a bank account on a regular basis and the deposits match the net amount on the paystubs the bank statements and the paystubs can be submitted with the W-7 to establish their earnings. Of course if these workers don't have a valid SSN or TIN it is impossible to open a checking account. Latino Tax Professionals Association suggest the IRS allow a W-7 application to be submitted with all the paystubs matching the W-2(s) as long as the name being used is the same on the W-2 and the paystubs. The W-7 applicant's legal name may be different, but submitting all the paystubs and W-2 demonstrates a validity to the worker's claim they earned these wages.
Date of Entry. Another issue the IRS has been struggling with on ITIN applications has been the date of entry into the United States. Applications are being submitted with dates of entry and no other substantiating documents are attached, for example, your client states they entered the country in December of 2005, the exact date isn't required, however month and year should be accurate. If your client has been working, submit the documentation that establishes when they began working and the type of work they have been doing, this will help the ITIN reviewer tie in the date entered and when work began.
Birth Dates. According to the IRS birth dates have been inconsistent with the birth records submitted and the birth dates on the W-7 applications. Please be very careful that the birth dates match the documentation being submitted.
Passport Rejection. Another common theme has been IRS rejecting passports. According to Ms. Bradley the most common reason the IRS rejects original passports is because they are not signed. The IRS will not accept an original passport that is not signed because everyone entering the United States with a passport must sign their passport if it is not signed upon entering. Some countries do not allow children to sign passports, such as India. The IRS is working on this challenge to come up with a solution.
Dependent Application Rejections. Now, let's talk about dependent applications. This is a very common theme and we received a vast number of complaints about IRS rejecting dependent applications.
First of all, school records need grades within the current 12 months. The IRS is not going to give in on this requirement, so we need to advise our clients that when they request school records, grades are included. If the dependent is in kindergarten or preschool, the IRS is not requesting grades. School records must be signed and dated by a school authority within the past 12 months.
Medical Record Rejections. Another common theme has been the rejection of medical records by the ITIN department. We know that many of our clients who live in Mexico live in rural areas and vaccinations are often administered by nurses or paramedics who travel into these rural areas, give the vaccination and leave a record behind. The IRS is requiring that the vaccination records be verified by the clinic or Medical Doctor who is supervising the nurse and that the records are current, within a year. This means the IRS wants more than a shot record.
Verify Existence of Dependent. The highest area of concern regarding dependent ITIN applications is verification of the existence of the dependent. If we know what scrutiny the IRS is going to apply to these documents, we know what to ask our clients to do ahead of time.
Certifying Acceptance Agents are asking about forensic document training certifications being submitted to the ITIN department and never hearing anything about whether or not the IRS received the certificate. If you as a CAA completed forensic document training and sent your original certificate to the IRS, the IRS will not notify you they received it. You are approved to certify documents for the taxpayer and spouse once you have submitted the original certificate to the IRS until 12/31/13. You must submit your Form 13551 during the window of applications from May 1, 2013 to August 31, 2013 to renew your contract for the next period you're contract indicates.
If you receive a letter from the IRS about your CAA status you must respond within 30 days, if you don't timely respond, the IRS will not allow you to renew for one year.
Delayed ITIN Application Notices. Another common theme has been the ITIN department has not sent an answer to our ITIN applications for several months. The ITIN department has 600 employees who review 2.6 million ITIN applications per year. Their goal is to turn around ITIN applications within 10 weeks or less. All ITIN employees go through 40 hours of training on ITIN procedures before they are allowed to process an ITIN. Please call the IRS ITIN department if your ITIN application has been delayed more than 10 weeks.
ITINs Mailed to Wrong Address. The IRS will only mail the original documents once. Be very careful you have the correct taxpayer address on the W-7. Be sure to let your client know their documentation will be sent to the taxpayer address.
Here are some recommendations Latino Tax Professionals Association would like to make to the ITIN department and hopefully help improve tax administration at the IRS.
• Since there are so many issues with the ITIN and application procedures the IRS needs to send out an email blast at least once a month to all CAAs and post this information on their website and keep it updated.
• CAAs need an ITIN team with a direct practitioner hotline #.
Hotline should have posted hours with trained employees answering the calls.
• CAAs should only be Circular 230 practitioners, including the new Registered Tax Return Preparer.
• CAAs should be able to certify documentation for all ITIN applicants upon completion of forensic training. The IRS should not be handling original documentation. CAAs should be trusted partners who will submit certified copies on behalf of taxpayers just like EAs, CPAs, and other Circular 230 practitioners submit tax returns.
• ITIN applications should be processed by one IRS individual and that individual sends the reject letter to the applicant with an area for written reasons for rejection and a phone number to call that individual back. There needs to be accountability for the rejection of applications, then the issuance of ITINs for the same applications that occur later.
• Online services for ITIN like "Where's my ITIN?".
• Check the box where you want your documents sent to.
• USCIS has an online application for immigration, the IRS would benefit by setting up a similar system. CAAs should be the only ones who can use the online system.
• Once a year CAA practitioner forum hosted by the IRS, Practitioner Partners and interested Associations.
Many members have asked us how to contact the ITIN unit. There are phone numbers on the correspondence you or clients have received that will have a phone number on the letter. That is the best number to call if you have specific questions.
You can also go to http://www.irs.gov/Individuals/Individual-Taxpayer-Identification-Number-(ITIN) there is an abundance of information on this web page.
Latino Tax Professionals Association thanks the IRS for listening to the common problems many of our members are having with ITIN applications. We will continue to work with our members and the IRS to get the ITIN process working efficiently.
Latino Tax Professionals Association encourages you to become a professional member of our organization. Together we can bring legislative change to the IRS.
Thank You,
Carlos C. Lopez, EA
Executive Director
Latino Tax Professionals Association
Carlos C. Lopez, EA, Latino Tax Professionals Association, http://www.latinotaxpro.org, +1 (831) 770-8421, [email protected]
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