ITIN Application Rejected for dependent child

[csexpert22]

Summary:

I want to claim Dependent Care FSA, which I assume, requires applying for new ITIN for my child. However, the child does not quality for child/other-dependent tax credit due to AGI threshold limit, which is why it appears that IRS has rejected the ITIN application. Please advise what should I do now?

Details:

I have used Turbo tax Online Premium and then I have physically mailed my 2023 year tax return to IRS. Filed the return with married filed jointly. My spouse, my child and I, all are U.S. resident aliens for year 2023.

In the tax return, I have also claimed for Dependent Care FSA for my dependent child (5 years old). My child did not have an SSN or ITIN as of now, so also mailed Form W7 alongside the return.

However, our household income exceeds maximum AGI limit for claiming any of Child Tax Credit or Credit for Other Dependents.

I have just received ITIN Rejection letter from IRS (Notice CP567) saying that the ITIN application is rejected because:

• you did not include a completed and signed federal tax return with your application.
• you were not listed on an attached federal tax return, or
• you were listed as a dependent on an attached federal tax return but were not claimed for any allowable tax benefit.

My understanding is that the application is rejected due to reason number 3 (you were not claimed for any allowable tax benefit). The turbo tax online tool did not "Check any box" for "if qualify for Child tax credit" or "Credit for other dependents", given AGI exceeding income threshold.

What should I do now? Please advise.

[Mike9241]

Did your return include form 2441 for the dependent care expenses? do you qualify?

eligibility tests to claim dependent care expenses

1) expenses must be paid so taxpayer and spouse can work or look for work. expenses must be prorated if the work test is met for only part of the year

2) expenses are not eligible if paid to the taxpayer's spouse or the parent of the child or a person you can claim as a dependent, or your child who is under 19 at year-end

3) the care provider must be identified u on the form 

4) your spouse must have earned income for the year

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if you do not qualify to report these expenses then there is no benefit to claiming the child, so the ITIN application was properly rejected 

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if you qualify to claim these expenses then call the number on the notice and explain your situation. then follow the agents instructions 

[Opus 17]

I think we need to go even more basic than that.  Why is your child not eligible for an SSN?  Is your child a US resident?  Did you claim your child as a dependent in 2023 and is the box for "Credit for other dependents" checked?

Then, did you actually have an FSA benefit on your W-2 for 2023?  With an amount in box 10 of your W-2?  Did you include a form 2441 with your tax return, and what does it say?

[csexpert22]

@Mike9241 Yes, we meet the mentioned criteria. I also provided Form 2441 when visited TAC (Taxpayer Assistance Centre) for documents verification. Whether TAC sent 2441 along with the return in mail or not, I am not able to get definite answer either from IRS customer care or from TAC representatives. They are only asking to submit all the documents again.

[csexpert22]

@Opus 17 Yes, we had FSA benefits on W2 and also amount in box 10. Regarding 2441, see above response fro my side.

[mogol]

Hi ,can you please help me about that as well.i did receive same but i am not sure what can i do,can you please advice ?

[Vanessa A]

Please be more specific on your situation?  Are you a resident alien or US citizen?  Do you have an ITIN or SSN? Your dependent was rejected?  Are they a Resident or non resident alien?  Are you trying to claim the dependent care credit or something else?  Married?  If so, filing jointly or separately?

[mogol]

Hi  my wife and I are resident not citizen.we filed jointly.my 2 kids are canadian.they are 4 and 2.and they live with us inn 2025.we went to tax assistance center and we send w7 with taxreturn d 2241.we left ITIN and SSN blank but their name are in first page of tax return.and we received below.1)you did not include a completed and signed federal tax return with your application.2)you were not listed on an attached federal tax return, or3)you were listed as a dependent on an attached federal tax return but were not claimed for any allowable tax benefit.

[RogerD1]

If you applied to get ITINs for your children using a W7, your tax return would have needed to be mailed along with those applications rather than electronically filing the returns.  The Taxpayer Assistance Center should have supplied you with instructions on what you needed to mail in with your application when you applied and that would have included a tax return with signatures.  Did the letter you got from the IRS give you instructions on what to do to remedy this situation?  If not, you could make another appointment at the Taxpayer Assistance Center to get additional assistance.

[mogol]

Hi yes ,i did not file electronically.i went to tax assitance center and they did copied w7 and return and my kids passport and i thought they will send those by themselves.so you are saying i still have to send those by mail?i mean so what was the benefit of going to center?irs asked me to fix those 3 and send again.but i have no idea what shiuld i fix even?i thought maybe they need schedule 3 form but in turbo tax we can not fillout since they dont have ITIN.so i am not sure what can i do 

[CatinaT1]

If you went to the Tax Assistance Center, they were likely a Certifying acceptance agent. If they returned your documents to you it means they certified your documents so you didn't need to send them in. They would have mailed in your return with copies of your certified documents. 

Are you saying you have now received a letter from the IRS after doing all this? Are the three points you included before from the IRS letter?

Do you remember if you signed your return before you left the Tax Assistance Center? They should have made sure it was signed. For your point 2 and 3, I'm not sure who you is referring too.

For us to help you we would need to know more about the letter you received from the IRS, but it might be easier to go back to the Tax Assistance Center so they can see the entire letter and what is being required.

[mogol]

Hi ,here is brief.i used turbotax for my family.and applied for my 2 kids for ITIN.i went to tax assitance center witj my family.they send my w7 and tax return and copied of my kids passport to IRS.i received a letter from IRS after one month and they mentiond i need to fix those 3 lines.i have no idea what else can i provide since i went to tax center and if everything was missing they shiuld tole me.the only thing is remained i think schedule 3 form for my kids.i could not add it into turbo tax for my kids.are there any way i can fillout credit for my kids using turbotax or maybe i am wrong about adding filling form of credit for my kids.can you please help if i am abale to fillout form credit for my kids without ITIN.

[RogerD1]

Filing a return using TurboTax is going to require that your dependents either have a Social Security Number or an Individual Taxpayer Identification Number before you can file a return.  It may be best to not claim your children on your return and paper file your tax return with the W7 applications for the children on it.  You can amend your return once the children have ITINs.  Since your children don't have Social Security Numbers, they won't be eligible for the Child Tax Credit, but they will be eligible for the Other Dependent Credit that is worth up to $500 per eligible dependent.

[mogol]

so you are sayin my kids are not eligible for child and dependent care expenses (form 2441)?

[RogerD1]

Yes, once your children have their ITINs, they will be eligible for both the Other Dependent Credit and also the Child and Dependent Care Credit.  They just won't be eligible for the Child Tax Credit or the Additional Child Tax Credit.