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Some Individual Taxpayer Identification Numbers are Expiring, ACA Compliance may be Affected

TWO MILLION Individual Taxpayer Identification Numbers (ITINs) are set to expire this year, according to the IRS. What does this mean for you? Here are some important answers:

What is an ITIN?
It’s a tax processing number issued by the IRS. To process and account for tax returns and payments from individuals who are not eligible for Social Security numbers, the IRS issues ITINs. ITINs may also be issued to non-resident or resident immigrants required to file federal tax returns, as well as their dependents or spouses.

Millions of ITINs are set to expire this year
The IRS recently urged affected taxpayers to renew expiring ITINs as soon as possible. Failing to do so may result in refund delays and disallowed tax credits and exemptions for filings submitted in 2020. Once the ITIN is renewed, the credits, exemptions, and refunds will be restored. Under the Protecting Americans from Tax Hikes (PATH) Act, enacted in 2015, ITINs that are unused in the last three consecutive years will expire on December 31, 2019. Further, ITINs with middle digits 83, 84, 85, 86 or 87 will expire if not renewed.

What does this mean for you?
Failing to renew an ITIN falls on the taxpayer in the form of IRS delays. There could be important ramifications for your operations if your employees don’t renew their ITINs in a timely manner. One area of concern arises in compliance with the Affordable Care Act’s Employer Mandate.

Under the ACA’s Employer Mandate, organizations with 50 or more full-time employees and full-time equivalent employees (known as ALEs) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce and their dependents whereby such coverage meets Minimum Value (MV) and is affordable for the employee or be subject to penalties. Employers submit forms 1094-C and 1095-C to the IRS each year to verify their obligations under the Employer Mandate. Form 1095-C, furnished to each employee, contains individual employee information, such as the employee’s social security number or other Taxpayer Identification Numbers (TIN). TIN is an umbrella term used by the IRS to refer to a Social Security Number (SSN), Employer Identification Number (EIN), ITIN, or an Adoption Taxpayer Identification Number (ATIN).

If employees fail to renew their ITINs, you may be faced with a situation where there are TIN validation errors identified by the IRS on your ACA annual filings. Failure to correct or resolve the errors may result in penalties under Internal Revenue Code section 6721/6722 under Notice 972CG. Penalties can also be imposed upon employers for failing to provide the correct information.

Here’s what you should do

Contact us to conduct an ACA Penalty Risk Assessment. This assessment reviews your 1094-C and 1095-C forms for previous filing years to ensure that no data errors have been made in your organization’s filings that might put your organization at risk of ACA penalties.

To learn more about ACA compliance for the 2019 tax year, call our office to speak with an agent.

Van Beurden Author