The U.S. Internal Revenue Service (IRS) has special rules for Canadian Citizens, and all foreign residents, with respect to filing U.S. income taxes.
What is an IRS ITIN Number?
An ITIN (Individual Taxpayer Identification Number) is a tax processing number issued by the IRS to Canadians or other non-U.S. citizens who are:
- required to have a U.S. taxpayer identification number, or
- required to file a U.S. tax return and do not have an IRS social security number, or are not eligible to obtain one.
These are some of the situations requiring you to file a U.S. tax return:
1 Taxable income from employment in the U.S.
You may have earned employment income if you worked for a U.S. business or educational institution. This often applies to Canadians who are in the U.S. as professors, students, or researchers, but applies to any employment income earned in the U.S.
2 Taxable trade or business income in the U.S.
Business income includes, but is not limited to:
- Payments for any personal services performed in the U.S. However, if you were in the U.S. for less than 90 days of the year, and earned less than $3,000, you will be eligible for an exemption.
- Net income from your U.S. incorporated business or partnership.
- Gains from the sale of any capital assets of a U.S. business.
- The sale of real property owned by a U.S. business.
- Rental income from U.S. real property.
3 Taxable rental income from U.S. real estate
This applies to rental income from personal ownership of a U.S. residential property that you rent for all or part of the year.
4 Royalties received from U.S. sources
There are a number of ways you may have earned royalty income. If you are a musician or author, you may receive musical performance royalties or book royalties. Other examples include mineral and franchising royalties.
In some cases, royalty income may be exempt from U.S. tax, and in other situations the tax may be at a reduced rate.
5 Winnings from lotteries, gambling, or prizes
Although these types of winnings are not taxable in Canada, you will have to pay U.S. tax if the winnings are from U.S. sources. You will be subject to a tax withholding of 30% of your winnings.
6 The sale of U.S. property
The Foreign Investment in Real Property Tax Act (FIRPTA) is the U.S. federal law that applies withholding tax on foreign persons for dispositions of U.S. property (real estate). The term disposition includes, but is not limited to, a sale or exchange, liquidation, gift, transfer, or redemption.
This applies to U.S. real estate, such as vacation property, or real property that you, as a non-U.S. citizen or resident, are selling. There are specific rules dealing with these situations. See our FIRPTA Guide for more information.
The IRS enforces FIRPTA to ensure the U.S. government is able to collect any tax obligations on foreign persons.
7 Applying for an exemption from U.S. withholding taxes
Under certain conditions, you may be eligible to apply for an exemption or reduction of taxes withheld from the sale of your U.S. property. These are stipulated under FIRPTA: Section 1445.
How to Apply for an ITIN
Canadians who need an ITIN number are required to file IRS Form W-7 along with certain required documents. Read more about the ITIN application here.
Even if you previously had an ITIN, if you haven’t used it on a U.S. federal tax return in the last three tax years, or if your ITIN was issued between 1996 and 2012 and has specific middle digits, you will have to re-apply and renew your ITIN.
What’s the Difference Between EIN and ITIN?
As stated above, an ITIN is a tax processing number issued by the IRS to Canadians and non-U.S. citizens who are required to file a U.S. tax return and do not have an IRS social security number, or are not eligible to obtain one. An EIN (Employer Identification Number) is a tax processing number for a business.
If you own a U.S. business, you may require an ITIN for your individual tax return filing and an EIN for your business taxes.
Our ITIN Fees:
$300, plus GST/HST, for an ITIN application (per applicant), plus disbursements to overnight courier the application to the IRS.
Does Getting Your ITIN Number Sound Complicated?
We get it. Anything you’re trying to do for the first time can seem overwhelming. It can take you quite a while to figure things out, and even then you run the risk of doing something wrong and having your application rejected.
As an IRS Certified Acceptance Agent, we’ve helped many people just like you obtain an ITIN number so they can achieve their goals.
Contact us today and we’ll look after the entire process quickly, efficiently, and affordably so you can breathe easy. Isn’t that a relief?