In the complex world of U.S. tax rules, it’s crucial to keep up with changes affecting your Individual Taxpayer Identification Number (ITIN). A significant change came with the PATH Act (Protecting Americans from Tax Hikes Act). Here’s what you need to know: if you don’t use your ITIN on a U.S. tax return (like Form 1040 or 1040NR) for three straight years, it expires for filing purposes. This rule now applies to all ITINs, both old and new. So, remember, the three-year rule is key.

Understanding the Effects: How It Affects Your Tax Situation

An ITIN’s main role is to enable yearly U.S. tax return filing. If you don’t need to file in a particular year, that’s fine. But, it’s important to know that if you decide to file later, any refunds or credits due to you will be on hold until your ITIN is renewed.

For instance, if you’ve recently sold U.S. property and had an ITIN from years back, renewing it is crucial before selling a holiday home or timeshare. This ensures a smoother refund process, avoiding IRS notifications about delayed refunds due to an expired ITIN.

When selling U.S. property as a non-resident, FIRPTA (Foreign Investment in Real Property Tax Act) rules apply, which involves a 15% tax on the gross sale. To claim this back, you need to file a U.S. tax return with an active ITIN.

In short, regularly using your ITIN for filings not only meets legal requirements but also smooths out the process for getting refunds and credits. Stay informed and proactive in the changing landscape of U.S. tax laws.

At Lion Business Services, we provide a smooth, 100% online, expedited, and guaranteed service for securing your ITIN, backed by our extensive experience and certification as an IRS Certified Acceptance Agent.

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