We welcome guest bloggers Luz Arevalo and Angela Divaris from Greater Boston Legal Services. GBLS is part of a coalition of nonprofit organizations who seek to maximize access to the expanded child tax credit for 2021. Angela and Luz highlight the problem of otherwise-eligible CTC claimants without a US taxpayer identification number who did not file an ITIN application or an extension of the filing deadline by April 18, 2022. Under IRC 24(e)(2), those families will miss out on the credit if nothing is done.
PT has covered barriers to receiving ITINs in several prior posts including last summer when ITIN delays and the cumbersome requirement to paper-file applications were highlighted in the NTA’s 2022 objectives report to Congress. Back in 2016, Patrick Thomas and Lany Villalobos wrote about the impact of the PATH Act and other ITIN issues described in the NTA’s 2015 annual report to Congress.
A related issue recently surfaced which I found interesting as it implicates several different administrative problems facing the IRS. In 2020 and 2021, the IRS encouraged people with expiring ITINs to renew early, separately (and before) filing their tax return to avoid refund delays. This well-intentioned message had unintended consequences, recently revealed in the NTA’s 2023 objectives report to Congress.
read more...The NTA explains that even if an individual submitted an ITIN renewal application well in advance before filing their tax return, due to processing backlogs the IRS computer system may have disallowed the CTC on the return via math error. Many people do not contest a math error notice (for various reasons), and the IRS does not always abate math error changes upon request although it is legally obliged to do so. Frustratingly, the IRS does not automatically restore the disallowed tax benefits when the ITIN unit catches up and restores the taxpayer’s ITIN. One wonders what “the right to a fair and just tax system” means if IRS processing delays can result in permanent disallowance of tax benefits intended to help children in a pandemic. TAS’s 2023 systemic advocacy objective number 13 is to restore tax benefits that were disallowed due to ITIN renewal processing delays.
Interestingly, the NTA notes that as of January 1, 2022 ITIN holders can no longer renew “in advance” – they must submit their renewal application with their tax return. I am not sure this is the best solution to the problem since it requires those families to suffer the refund delays that advance renewals were intended to prevent. Fixing the IRS computer systems to prevent the issuance of math error notices when an ITIN application is pending would seem a more taxpayer-friendly solution. Sadly, IT-based solutions are easier said than done when it comes to the IRS.
Christine
Timing is everything. For many immigrant taxpayers, the time to claim the enhanced Child Tax Credit and the Recovery Rebate Credit ran out on April 18, 2022. As of this writing, however, we believe that the Service is considering several requests to extend the filing deadline for those immigrant families who did not apply for their taxpayer identification numbers before the filing deadline.
Section 205 of the 2015 PATH Act requires that a tax filer have been issued a taxpayer identification number or have requested a filing extension before the tax-filing due date (and be issued a TIN by the extended filing deadline) in order to claim a child tax credit. Many thousands of mixed status households who faced severe obstacles obtaining ITINs or who received their Social Security numbers after the April filing due date are, thus, now tragically prevented from claiming the enhanced Child Tax Credit for their children, most of whom are U.S. citizens, who are otherwise eligible if they had social security numbers. These immigrant families faced severe pandemic related challenges to filing exacerbated by widespread misinformation regarding their eligibility.
Over 100 organizations signed a letter asking Commissioner Rettig and Secretary Yellen to extend the filing deadline for these households based on the emergency declaration prompted by the COVID-19 pandemic (as authorized by IRC 7508A) and in order to fulfill the legislative intent of the American Rescue Plan Act (ARPA). Similar requests were made by 7 senators and 28 mayors. The Commissioner has the authority to extend filing deadlines in response to emergency declarations, and the COVID-19 declaration should be considered as grounds to support a one-time filing extension to allow families to claim a one-time emergency benefit.
The 2021 tax year was a critically important one for American families. The American Rescue Plan Act (ARPA), which was drafted in response to COVID-19 pandemic, directed the IRS to distribute relief funds to the vast majority of families in the country. Its historic Child Tax Credit expansion has been hailed as a life-line with the potential to slash childhood poverty in the country to its lowest level on record. There were obvious obstacles in the distribution of the credit to the lowest income households who exist outside the tax system, and especially those in mixed status families. The IRS recognized that eligibility would not translate into actual access for as many as 2.3 million children. These low-income households – the ones most needing the refundable credits- were the hardest to reach and became the objects of outreach from the White House down to community groups working on the ground. It was an impossible task to complete during filing season. Many of these children who predictably fell through the cracks had a parent who faced the added burden of obtaining an Individual Taxpayer Identification Number (ITIN) and are now out of time. The equitable administration of ARPA will be served if all the children contemplated continue to enjoy the same access to this historic relief in a time of crisis.
Should this deadline be extended, there will be a need for advocates to reach these deserving children by participating in targeted outreach and filing assistance.
