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.
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.