On what basis can Canadian residents obtain an ITIN?

Note: The following is written to provide general advice regarding applying for an ITIN, specifically using the example of royalties and passive income withholding. Obtaining an ITIN issued solely for credit cards is not listed by the IRS as a reason for an ITIN being issued.

Based on Exception 1(d), Canadian who anticipate receiving royalties can apply for an ITIN to reduce tax withholding.

The IRS describes the Individual Taxpayer Identification Number (ITIN) as a number issued for individuals who need a taxpayer identification number, but who don’t have and aren’t eligible for a Social Security Number. One case in which the IRS permits an ITIN to be issued is for an individual claiming a reduced withholding under a tax treaty.

The W-7 form for the ITIN can be submitted to claim reduced withholding under a tax treaty (i.e., “Exception 1. Passive income — third-party withholding or tax treaty benefits''). More specifically, Exception 1(d) is for individuals receiving distributions such as royalties and are required to provide an ITIN for withholding and reporting requirements.

As such, the IRS requires that a letter be issued from the withholding agency confirming that an ITIN is necessary due to distributions that would require withholding or reporting information to the IRS. The Amazon letter works well for this purpose, as it demonstrates to the IRS that you anticipate receiving passive income, and therefore need an ITIN to change the amount of tax withheld.

Incidentally, if your writing career doesn’t work out and you never manage to publish a book with Amazon, that’s unfortunate but at least you have an ITIN if you ever return to your writing career. In the meantime, you can use your ITIN for whatever requires it, be it credit card applications or other withholding needs.

Last updated 11 May 2019. Any questions?
Contact me.