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

****************

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 

*************************

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?