Tax ID Numbers in the US for Canadians

Allan Madan, CA
 Feb 14, 2013
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Canadians earning income in the US need a US Tax ID Number. This article will show you what you need in order to get your US tax ID number.

What is an ITIN?
An International Taxpayer Identification Number (ITIN) is a number that is assigned to non-resident aliens of the US who earn income in the US. This number is not a replacement for the SSN and does not grant any residency status in the US (unlike a green-card or work visa). There are new requirements for Canadians obtaining a US tax ID number.

Previously the IRS would issue an ITIN applicant an ITIN card. However, due to the confusion and similarity to a SSN card, the IRS has amended this policy and now only issues a confirmation letter to Canadians applying for a tax ID number in the United States.

If you are eligible for a SSN, you must first apply for one. Persons eligible to receive a Social Security Number are not eligible to receive an ITIN. If the Social Security Administration denies the applicant’s request for a SSN they will issue a letter of denial. That letter must be attached to the Form W-7 (application for an ITIN) when it is submitted to the IRS.

Can applying for a US Tax ID Number help me?
As a Canadian earning income in the US, the tax id number provides several key benefits including:

  • Lower withholding taxes on US earned income
  • Claiming foreign tax credits on your Canadian tax return for US taxes paid
  • Prove your foreign status in the US
  • Reduce the chance of double taxation

In addition to these benefits, the IRS stipulates that the ITIN is required to file your 1040-NR, process a tax refund, and withhold taxes on certain types of Income in the US.

How can Canadians get a tax identification number (ITIN)?
In order to properly apply for your ITIN you must prepare Form W-7 and present proof of residence in Canada. The important facts that you should know about when applying for an ITIN are:

The IRS streamlined the number of documents it accepts as proof of identity and foreign status to obtain an ITIN. There are 13 acceptable documents

  • Each document must be current and contain an expiration date. The IRS will accept documents issued within 12 months of the application if no expiration date is normally available.
  • Documents must also show your name and photograph, and support your claim of foreign status. The most commonly used document by Canadians applying for ITIN is a Canadian Passport.
  • Notarized copies from a lawyer are not acceptable. The IRS will only accept copies that are certified by the issuing agency.

If the above documents are not provided your ITIN Application will be denied.

As a cross border tax specialist operating in the Greater Toronto Area, we can help you with:

  • Getting a tax identification number
  • Co-ordinate your ITIN application to minimize delays
  • Identifying withholding tax requirements in the US and opportunities to minimize these taxes.

Please note that Form W-7 for your tax ID number is usually only accepted when it is submitted with your Non-Resident US tax return. However, there are certain exceptions to this rule that can help expedite the application process.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 6

  1. “Hi, Everyone!

    QUESTION: As I Canadian company established in Toronto Ontario with a warehouse in Dallas Texas and selling goods in the US do I need a US Tax ID?
    Thanks,”

    1. Hi Amine,

      Technically, your company should have an EIN and file a treaty-based return to claim an exemption from US taxes on business profits pursuant to the Canada-US tax treaty.

  2. Your responses are very very helpful,Allan!I am in a unique situation.I recently moved to Canada from the USA. I was on a work visa in the USA for 6 years so I do have a Social Security Number but it says “valid only with valid work authorization from Department of Homeland Security” since I am not a U.S citizen or Greencard holder and was in the USA on H-1B work visa. I am a Canadian permanent resident now and live in Vancouver,Briti sh Columbia. I would like to know if I am exempt from tax reporting requirements in the USA as a Canadian resident doing business on eCommerce sites like eBay and Amazon? Is there any US-Canada tax treaty that will save me from double taxation if I want ? I am assuming my Social Security Number is no good since it is valid only with work authorization in the USA but I am wondering if my long history of being a taxpayer in the USA for 6 years while being on a work visa will make it easier for me for getting ITIN or TAX ID easily to work with suppliers. Appreciate your insights on it!

    1. Hi Sanjay,

      You need to apply for an EIN (US Tax ID Number) for your business. Your business is not liable for US income tax on sales made through Amazon. This is because you do not have a fixed place of business in the US.

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