ITIN application rejected

[AlexSagrat]

I've prepared a federal tax return (married jointly), completed W7 forms for my wife and son, collected all required documents. Then scheduled an appointment at TAC where everything was verified, certified and sent to IRS.

After few weeks got an approval letter for my wife and rejection for my son. Talked to IRS/ITIN and according to them the reason is "dependent is not claimed for any allowable tax benefit" (either row 1e or 19).

But I have row 19 filled out ($2000) with Schedule 8812 completed and attached (row 1e is empty and no form 2441). I've definitely provided ALL pages to the TAC employee. 

IRIS/ITIN employee was not able to access and check my federal return (if Row 19 is filled out and a completed Schedule 8812 attached). Explanation I got: ITIN rejection letter was sent only recently, it takes up to 6-8 weeks to re-adjust tax return and only after that they will be able to see and check my federal return pages.

1) Rejection letter clearly says to re-send documents. But IRS/ITIN employee told me that it won't work. ITIN will be rejected anyway because it's already past tax return deadline of Apr 15th. Re-application/application will only be possible next year. 

I'm totally and completely confused. Can I re-apply now? 

2) Another point they brought up is to try to call them back in 6-8 weeks once return will be re-adjusted. Only then they will be able to access my federal return pages and check if Row 19 was filled out and Schedule 8812 completed. If that is the case then maybe they will re-process refund (no promises is what they've mentioned...). 

I'm really confused. 

[AlexSagrat]

Had another call with ITIN department. This time I got a different response: most likely ITIN was rejected because I cannot claim child tax credit while applying for ITIN. Instead I should have selected other/additional child credits in 1040. They were not able to explain what exactly this means and what needs to be modified in 1040.

Then I've asked if I can still re-apply for ITIN and make 1040 modifications (whatever it is). Initially response was - yes, then it should be an amendment 1040 and finally no, it's not possible now because I can select other/additional child credits only if I already have ITIN or prior to Apr 15th.

In both calls ITIN employees made lot of requests to research more. That's fine, but I'm under the impression that they didn't really know exactly why it was rejected and what are the next steps.

I'm lost. If someone could please provide feedback, explanation and what are my options now. Maybe share how they got ITIN (what was selected in 1040 for dependent child, etc.).

[JotikaT2]

You will only be able to claim the Child Tax Credit if your child has a Social Security number.  Please see this link for additional requirements that must also be met.

If you are able to get an ITIN for your child, then you might be able to claim the Credit for Other Dependents.  This credit is $500 per qualifying child or relative.

If you are able to obtain either of these numbers for your child, follow the instructions in this link to amend your returns to include the applicable credit.

As far as the ITIN, you do have a few options available.  SInce you filed your 2023 tax return on time, you may be able to submit the requested documents to the IRS per the letter you received.  Please see this link for more details from the IRS.

[AlexSagrat]

I think I've found an error I made while reading multiple posts where others are applying for ITIN. As you've mentioned, child tax credit could be claimed only if child has SSN. Instead, everyone was indicating credit for other dependents while filing a tax return and applying for ITIN. 

1) Is above understanding correct and the right way to file tax return with ITIN application? Meaning, to indicate credit for other dependents instead of child tax credit. At least that's what others are doing.

2) Initially I was just planning to re-submit requested documents. But per IRS, modifications related to credit does require 1040X form. So I think it needs to be done through an amendment. Should I wait for my current refund to be processed and received to file amendment with W7? Or I can just go ahead right away?

Asking all these questions because I got lot of confusing information from ITIN department. For example, they've implicitly confirmed that 'credit for other dependents' should be used instead of child tax credit while applying for ITIN. But in this case tax return amendment is not possible because it's past Apr 15th. They were very unconfident and unsure while providing this info. 

Per my understanding, it's still possible to apply for ITIN. Modify credit type, complete 1040X and file with W7. Just wanted to know if that is the right way.

[JotikaT2 · Accepted solution]

Your understanding is correct.  Unless the child has a Social Security number, you cannot claim the Child Tax Credit but can claim the Credit for Other Dependents if the child has an ITIN.

As far as the amended return, wait until the IRS processes your return and you receive your refund.  Please see this link for additional guidance on amending your return.