How to get an ITIN for a US investment account as a Canadian?

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It’s very common for Canadians to receive an inheritance from a US relative. In these cases some of the inheritance might come in the form of regular investment accounts or retirement accounts such as IRAs or ROTH IRAs.

In order for the investment custodian to open the new inherited investment account in the Canadian’s name they require a US tax ID, also known as an Individual Tax Identification Number.

Please note: this article is for informational purposes only and you should contact a competent accountant or acceptance agent to assist you in properly applying for your US ITIN.

What is an ITIN?

A US ITIN, or Individual Taxpayer Identification Number, is a unique tax processing number issued by the Internal Revenue Service (IRS) to individuals who are required to have a US taxpayer identification number but are not eligible to obtain a Social Security number. This includes nonresident aliens, foreign nationals, and their dependents who earn income in the United States. An ITIN does not provide authorization to work in the US or eligibility for Social Security benefits. However, it is essential for tax reporting purposes and is used to file tax returns, claim tax refunds, and receive other tax-related benefits. To obtain an ITIN, an individual must complete and submit Form W-7 along with the required documents to the IRS.

How do I get an ITIN?

You can request an ITIN via form W7 – application for an IRS Individual Taxpayer Identification Number.

Let me first preface these instructions by saying that the success rate in obtaining an ITIN without also filing a US tax return is relatively low. In many cases applicants will be rejected with very little explanation or direction by the IRS. This is in part due to the abuse of some individuals receiving fraudulent child tax credits in 2013.

If possible, it’s advisable to file the W7 application with a US non-resident tax return to increase your chances of successfully receiving the ITIN from the IRS. This would only be applicable in cases where you’re receiving income from the US that was not properly withheld on and therefore you will be either requesting a refund or paying a specific amount of tax on US source income via form 1040NR.

How to complete the W7 to receive the ITIN as a Canadian for an investment account?

The W7 application can be used for reasons other than for a US investment account, however for purposes of this article we will be discussing the procedures related applications for Canadians inheriting US investment accounts.

To apply for an ITIN you’ll need to complete IRS form W-7. We’ll walk through the general steps in completing this form, however it’s highly advisable that you engage a competent professional to help you complete and file this application.

Step 1: Outline the reason why you are applying for an ITIN. Assuming you will not be filing a tax return with the W7 you will want to check the following boxes and explanations

Not that you’ll need to verify that this is a new ITIN application and that the treaty country in question is Canada. You’ll also need to include the specific exemption requirement by the IRS for box h. In this case the exception to include is 1(d):

1(d) Individuals who are receiving distributions during the current tax year of income such as pensions, annuities, rental income, royalties, dividends, etc., and are required to provide an ITIN to the withholding agent (for example, an investment company, insurance company, financial institution, etc.) for the purposes of tax withholding and/or reporting requirements.

Step 2: The next section is fairly straight forward. You’ll need to enter your full name, address, birth information and gender. Make sure this information matches the information on your passport (more on this below).

Step 3: Include information on the ID you will be including with the application. There are many options for ID inclusion, however we always suggest including copies of your passport (more on this below) as it seems to increase the chances of receiving the ITIN.

Step 4: Sign and date the bottom of the form. If you will be having an acceptance agent complete the form for you they will also be signing the form (more on this below).

Step 5: Attached the required paperwork. In this case you’ll need 2 sets of documentation. First, you’ll need to provide your passport identification. One option is to actually send your passport to the IRS and then have them send it back. Obviously that’s not something we would normally recommend. Your other option is to include a certified copy of the passport from your local passport office.

Simply visit your passport office and ask for a certified copy. You can then attach this copy as your identification for purposes of the W7 application. Alternatively, if you’re using an acceptance agent they can certify your passport copy, however you’ll need to meet them in person to do so. You can find a list of Canadian acceptance agents in your area here.

If you don’t have access to your passport you can use the following chart for alternative identification options:

Also, in order to claim the exception in “h” you’ll need to also include a letter from the investment company requiring the US ITIN. This letter should include the following:

1(d) An original document or signed letter from the withholding agent, on official letterhead, showing your name and verifying that an ITIN is required to make distributions to you during the current tax year that are subject to IRS information reporting and/or federal tax withholding. Self-generated income statements will only be accepted with a copy of the contract or a letter with a postmarked envelope addressed from the withholding agent.

Step 6: Compile both the W7 application and required documentation and mail to the following address:

Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

How long will it take to receive the ITIN?

Generally speaking you should receive a notice from the IRS within 6 to 8 weeks from when they receive the application. However, depending on the time of year and how busy the department is it certainly could take much longer. In cases where you send the application with a 1040NR tax return the timeline tends to be a lot shorter.

As mentioned above the IRS is notorious for disallowing ITIN applications even in situations where all the appropriate documentation has been submitted. It’s always advisable to use an acceptance agent to complete, file and mail the W7 application to increase your chances of successfully receiving your ITIN.

If you need help in planning for your inherited US investments or need a referral to a competent cross-border accountant to help in the W7 preparation please contact me at here and I’ll do my best to help.

Cheers

Phil

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