Posts Tagged ‘ITIN’

Casinos Can No Longer Issue ITINs

Monday, February 13th, 2017

Suppose you’re a resident of the United Kingdom and you come to Las Vegas to play in the World Series of Poker (WSOP) or just try your luck at a slot machine here. You have good luck and manage to win $10,000. Even better, given that the United States and the United Kingdom have a tax treaty you know you won’t owe any tax to the IRS. Imagine your surprise when the casino hands you $7,000 rather than $10,000. You’re informed that casinos are no longer allowed to issue Individual Taxpayer Identification Numbers (ITINs) by the IRS; unless you have a valid ITIN the casino must withhold 30% of your winnings.

On Friday, the IRS sent a major casino here in Las Vegas a letter informing them that because of a provision in the PATH Act no one but the IRS can issue ITINs. I assume all casinos that had been authorized by the IRS to issue ITINs have received this letter and are implementing this policy.

If you have a valid ITIN (and have renewed it, if applicable), this new policy won’t matter to you. For all other non-Americans who would normally not be subject to withholding you need to obtain an ITIN. Unfortunately, this is anything but easy.

You used to be able to use a Certified Acceptance Agent (CAA). CAAs were in numerous countries and would be able to obtain an ITIN for those who could show a Tax Treaty reason for doing so. The PATH Act ended CAAs so that’s gone.

There used to be a few IRS employees outside the United States. You could make an appointment to see one of these individuals, show him or her the required documents, and you would have an ITIN issued. Unfortunately, there no longer are IRS employees abroad.

You can, of course, send in Form W-7 and all required attachments (this includes your passport) to the IRS. Given you just might need that passport this doesn’t look like a good solution.

That leaves just one method that I know of: Going to an IRS office, proving a Tax Treaty reason, and submitting the required documents. An IRS employee will make a copy of your passport. While you will not get the ITIN immediately (the paperwork is still sent to the ITIN office in Austin, Texas) you will still have your passport. In eight to sixteen weeks you will receive your ITIN in the mail.

But what about those winnings? If you take that money now, the casino will give you a Form 1042-S and withhold the 30%. You can then file a US tax return the following year, attaching a copy of the 1042-S, and six or so months later you will receive your withholding back. (This assumes you reside in a country that has a Tax Treaty with the US that exempts gambling winnings from taxation.)

The poker room manager I spoke with noted that you could leave the money with the casino and come back when you have your ITIN. That may work if you don’t need that money and the casino will allow that. Otherwise, you will likely be without the withheld funds for some time.

The National Association of Enrolled Agents (NAEA) sent a letter to the IRS requesting that CAAs continue to be allowed to issue ITINs. The IRS responded by saying “blame Congress, not us.” I expect the American Gaming Association to complain to both the IRS and Congress about the inability of casinos to issue ITINs.

There’s one last issue: You can no longer just walk into an IRS office and get assistance; you must make an appointment. You have to call the IRS (at 844-545-5640; this phone number works for making an appointment at any IRS office) to make an appointment at the IRS office in downtown Las Vegas. The last time I checked if you called today the earliest you would have your appointment is two weeks from today. If you don’t have an ITIN, reside in a Tax Treaty country, and plan on playing in the World Series of Poker this summer, you may want to make an appointment with the IRS so that you can start the process of obtaining your ITIN prior to playing.

Hopefully, the IRS and/or Congress will reconsider this policy. Until then, the IRS is playing the role of the Grinch for many gambling winners.

UPDATE: The World Series of poker tweeted that they will still be able to issue ITINs:

While I hope that @WSOP is correct, based on what I’ve been told they’re wrong (unless Congress changes the law or the IRS changes their mind). The problem is that the IRS has interpreted the PATH Act that only they can issue ITINs. The individual I spoke with is certainly in the know, and the casino he works act has issued ITINs in the past and would like to continue issuing ITINs. The IRS can’t discriminate and allow Caesars Entertainment’s casinos to issue ITINs while MGM/Mirage, Venetian, and Wynn/Encore cannot.

My hope in publicizing this decision is that the policy will change, either by Congress acting or groups such as the American Gaming Association pressuring the IRS.

Five Sentenced for Tax Fraud; Justice Department Gets ITINs Wrong

Sunday, August 14th, 2016

A Justice Department press release caught my eye. Five individuals, all Mexican nationals residing in the US, were sentenced to ClubFed for terms between 33 months and 121 months. The five individuals had pleaded guilty to conspiracy to commit mail fraud, and they had indeed done so:

Beginning in 2014 and under the direction of Natividad Medina, the defendants conspired to steal money from the U.S. Treasury and U.S. taxpayers by exploiting the ITIN system. The Medina sisters began by collecting Mexican identification documents from unknown people in Mexico and used those to fraudulently obtain ITINs. The Medina sisters then used those ITINs to submit false and fraudulent income tax returns to the Internal Revenue Service Center in Austin. They requested that the IRS mail refund checks to residences or to one of more than 200 post office boxes in and around the Houston area which Lopez had rented and maintained on behalf of the Medina sisters.

Kudos to the DOJ and IRS Criminal Investigation for stopping these individuals.

Unfortunately, either the Department of Justice or the US Attorney’s Office for the Western District of Texas needs to learn more about Individual Taxpayer Identification Numbers (ITINs). Here’s what they say about ITINs:

According to court records, in 1996, the Internal Revenue Service began issuing Individual Taxpayer Identification Numbers, or “ITINs”. By obtaining an ITIN, an individual who is already disregarding federal law by living in the United States illegally is given the opportunity to comply with federal law by filing taxes. If the applicant can furnish sufficient proof (i.e. foreign birth certificate, national identification card, passport, etc.) that he or she is living in the United States illegally, the IRS will issue that person an ITIN.

While that’s true, there are other purposes ITINs are used for. If a US citizen is married to a non-American, an ITIN can be issued for the spouse. An ITIN can also be issued for a dependent of a US citizen. A non-citizen who has a US tax filing responsibility (and who is not in the US illegally) will also be issued an ITIN. One would think that the DOJ or US Attorney’s Office might look at an IRS web page (like this one) to see the legitimate reasons why one would obtain an ITIN.

While I was on vacation came the news that ITINs will now expire, with ITINs with middle digits of “78” and “79” expiring this year. While a renewal application (Form W-7) will be available by October 1st, and you won’t need to file a tax return to renew the ITIN, I’ve had lots of problems with the ITIN office (lost applications, lost paperwork, problems even when the Taxpayer Advocate Office handed the paperwork in) that I’m glad it appears none of my clients are in the first group of renewals. If you get the idea that I’m expecting problems, you’re right. But I digress….

In any case, I do say well done to the DOJ for putting these scofflaws behind bars. However, next time read up on why some people who are either visiting the US quite legally or are related to a US citizen really need an ITIN in order for them (or a US citizen) to comply with their US tax filing responsibilities.

At Least They Got 30% Right…

Thursday, December 24th, 2009

Government efficiency is usually thought of as an oxymoron. Yet another example of this has come to light—this time, in the world of tax. The Treasury Inspector General for Tax Administration (TIGTA) audited the IRS’ assignment of Individual Taxpayer Identification Numbers (ITINs) and found:

“TIGTA reviewed a sample of ITIN applications and found that almost 70% contained significant errors and/or raised concerns that should have prevented the issuance of an ITIN. The IRS estimates that it has issued more than 14 million ITINs as of December 2008.”

And we’re going to be giving healthcare work to the IRS, too?!?

HatTip: TaxProf Blog