Returns processed and ITIN Rejected for children

[santhoz]

Hi All,

I had filed my Tax returns in paper and applied ITIN for my dependents (spouse and 2 children) together on Feb18th 2020. In early July, My spouse received her ITIN alone and we received a separate ITIN rejection notice (CP567) for my daughters. It was rejected because, I made an error in my Form 1040 in which I checked "Child tax credit" instead of "Credit for other dependents" for my children.

Therefore I reapplied the ITIN for my children (with the rejection notice) along with the Form 1040 in which I corrected the mistake and checked "Credit for other dependents". While I was doing this, my original tax refund got processed and it looks like they didn't consider my children for the returns and refunded an amount which less than what I had applied for.

Its been around 12 weeks since I reapplied for my children's ITIN with no response. I tried speaking to IRS multiple times and they give same response and I should wait for some more time. They also dont give a proper answer to my questions, It will be great if someone in this forum can help.

My question is,

1. What happens after I get the ITIN, Can I reach out to IRS on phone to include my children's ITIN to the same 2019 returns and claim the remaining refund or should I re-file an Amendment tax returns and go through the whole process again?

2. Meanwhile, I was also unable to file the California State tax returns due to the same reason - is it ok to wait until I get the children's ITIN numbers or should I be doing something to keep the state tax department informed?

Please advise. Thanks in advance.

[pk]

@santhoz ,  since you have already filed a corrected return to satisfy IRS rejection of the ITINs for the children, once you receive  the ITIN  you would need to file an amended return requesting  the refund for dependent care.

In the meantime since you do have the ITIN for your wife, you should file the CA state return including your wife but leaving the children out ( because of NIL tax ID ) and then when you receive the ITINs for the children  file an amended return  ( using the  amended Federal  return  as basis ).

These steps would bring you into compliance  and resolved tax issues.

pk

[muthuc]

Hi Santhosh

I submitted ITIN application form for my son and received CP567 notice for the same reason as yours. Can I resubmit the new W7 form along with the corrected 1040 via IRS in-person option? How did you resubmit for your daughters ITIN? 

I am worried to send the original document via mail during this pandemic times. Hoping there would be alternative for replying to the CP567 notice. Thanks! 

[dtmathew]

I had the same issue as Santoz recently for a client for 2023.  I had applied  W7s for a spouse and 3 children.  IRS approved  ITIN for the spouse and  processed the return  but rejected ITIN for the children.  One of the reasons they gave on the rejection notice was that they were listed on the tax return but were not claimed for any allowable tax benefit.  My client's income was low that they had no tax liability. I prepared the tax return on Proseries and without an ITIN no or social security no. it will not mark the box for 'credit for other dependents'.  For my client, even if I marked it manually, I am not sure that they would have approved since there was no tax liability.  But for the state, kids would have exemptions for qualified dependents.  Without them qualified  on the federal return, I decided to file the state without the children and in 2024 I will apply for ITIN for the kids on new W7 and going to manually mark the other dependents credit box and file in 2024 tax return.  When they hopefully get the ITIN next year, I plan to amend the 2023 state return in 2025.

I am curious what happened with Santoz's 2020 amended  return in 2021.  Did they approve the ITIN numbers then?

[dtmathew]

I advised my clients to take the applications with the prepared 1040 to a local IRS office where they woud verify the information and send it to the IRS to process the tax return but they will return the originals back to the clients instead of mailing them,