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For the 2022 tax year, the IRS received 3.8 million tax returns and a total $20.9 billion in income, Medicare and Social Security taxes from taxpayers with individual taxpayer identification numbers.\u00a0Picture this reality at one department at the Internal Revenue Service: There is so much unprocessed paperwork that, if stacked, it would rise 11 times higher than the Statue of Liberty.<\/p>\n
IRS agents who are tasked with verifying the authenticity of the documents and processing them are equipped with magnifying glasses and reference materials to help guide them, but no digital tools, according to the Taxpayer Advocate Service.\u00a0This department is responsible for reviewing applications for individual taxpayer identification numbers (ITINs<\/a>) by people who don\u2019t have a Social Security number. You must have one of these two numbers to file a tax return.<\/p>\n People who require ITINs are mostly foreign nationals who either work or have property or investments in the U.S. and must report their income and pay taxes here. For the 2022 tax year, the IRS received 3.8 million tax returns and a total of $20.9 billion in income, Medicare and Social Security taxes from taxpayers with ITINs.\u00a0Frustrations in dealing with this part of the IRS are off the charts, many tax preparers say.\u00a0\u201cThe applications get denied all the time, but they don\u2019t tell you why, and you have to resubmit and go through the whole process again,\u201d says Ryan Losi, executive vice president of the accounting firm PIASCIK.<\/p>\n Lost documents are common. Getting an ITIN requires identification, and most applicants include a passport with their applications. According to the IRS Taxpayer Advocate, last year 17,402 identifying documents either were thrown away, went missing or were returned to an embassy instead of the taxpayer.\u00a0\u201cEven in the best-case scenario of ITIN processing, taxpayers would have to live without their identification documents for seven to 11 weeks, with no real possibility of recalling the documents earlier if needed, such as for emergency travel or legal issues,\u201d the Taxpayer Advocate notes in a recent report to Congress on the issue.\u00a0Marcell Hetenyi, an accountant at Scheckner & Hetenyi in Miami, said he recently had to submit an application several times and the process stretched over years for a Canadian couple who already had their ITINs but needed one for their young child.\u00a0\u201cYou can only claim the child as a dependent from the year you get the ITIN. They were rejected in 2022 and 2023 after submitting documents from daycare and the child\u2019s physician,\u201d says Hetenyi, who is certified by the IRS as an acceptance agent<\/a>. That gives him the authority to authenticate identification documents like passports, so they don\u2019t have to be submitted.<\/p>\n Still, cutting out that step doesn\u2019t always smooth the process, he says. \u201cI\u2019ve been on the phone with an agent after an application got rejected for a missing attachment even though it had been included. The agent said they could actually see the attachment, but because it was originally rejected you have to go back to the beginning of the process,\u201d Hetenyi says.\u00a0The ITIN nightmare isn\u2019t a concern for the majority of taxpayers. Most Americans filing a 2024 tax return instead use a Social Security number and have been benefiting from improved customer service and staffing at the IRS thanks to funding from the Inflation Reduction Act of 2022.\u00a0These improvements could be short-lived. President Donald Trump ordered a hiring freeze for the federal government on Jan. 20. For the IRS, the freeze will last until the Treasury Secretary can prove it is in the national interest to lift it. On top of that, the White House has offered buyouts to nearly all federal employees, including those at the IRS, as it attempts to slash costs.\u00a0The push to shrink the U.S. government comes as the IRS hit its highest staff levels in nearly 30 years. Rapid attrition could unravel the staffing gains and worsen IRS service again.<\/p>\n \u201cThere is some data suggesting that about 63% of the IRS workforce is eligible to retire within six years, which will be a headwind for the IRS workforce size even in a more accommodating environment,\u201d says Garrett Watson, director of policy analysis at the Tax Foundation, a nonpartisan tax policy nonprofit. \u201cThe actual rate of retirements may be determined in large part by morale at the agency and whether some of them may take the latest offer for severance.\u201d\u00a0Hamstringing the IRS could do more than hurt customer service. It could also mean an increase in the already massive tax revenue shortfalls for the federal government.\u00a0The tax gap\u2014which is the difference between the taxes owed for a given year and the taxes collected\u2014has ballooned and currently stands at almost $700 billion.<\/p>\n