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United States Taxpayer Identification Numbers (TINs)

Important Changes to Application Processes – For Those Working, Conducting Business or Investing in the United States

Introduction

Following 9/11, the Internal Revenue Service (IRS) in the United States has considerably tightened its control over the issuance of TINs. A Taxpayer Identification Number (TIN) is an identification number used by the IRS in the administration of tax laws. It is issued by either the Social Security Administration (SSA) or by the IRS. A Social Security Number (SSN) is issued by the SSA whereas all other TINs are issued by the IRS. Confusion is presently rampant over the application process for IRS-issued TINs.

Note: Any temporary identification numbers previously assigned by the IRS are no longer valid. Canadian Social Insurance or Business Numbers will not be recognized by the IRS.

Taxpayer Identification Numbers

The most common TINs are as follows:

  • Social Security Number (SSN) – go to www.ssa.gov
  • Employer Identification Number (EIN)
  • Individual Taxpayer Identification Number (ITIN)
  • Taxpayer Identification Number for Pending US Adoptions (ATIN)
  • Preparer Taxpayer Identification Number (PTIN) – Only issued if preparer has a SSN

The IRS will reject any tax filing or communication of any kind which does not provide a TIN. Since 1996, the IRS has issued 7 million ITINs.

Which Canadian Taxpayers May Require ITINs?

  • Canadian residents working in the U.S. require SSNs
  • Spouses or dependants of Canadians working in the U.S.
  • Principal officers of Canadian corporations with business in the U.S.
  • Canadian residents receiving royalty income from the U.S.
  • Canadian residents receiving payments from U.S. Corporations or partnerships
  • Canadian residents selling real estate in the U.S.
  • Canadian residents receiving alimony payments from a U.S. resident
  • Canadian residents opening U.S. bank accounts

Restricted Issuance of ITINs

The IRS is attempting to ensure that ITINs are issued for tax administration purposes only. In most cases, ITINs can now only be obtained on the filing of U.S. tax returns with the assistance of an acceptance agent. In a limited number of cases, ITINs can be obtained without an accompanying tax return provided the request fits within a narrow range of exceptions. Substantial documentation is usually required to support the exception. Evidence of both the ownership of income-producing assets and the related withholding requirements is normally required. The IRS has reduced the number of acceptable documents to substantiate identity and alien status from 40 to 13. It usually takes the IRS between 6 and 10 weeks to issue an ITIN with the rate of application rejection being very high.

Acceptance Agents

Acceptance agents are entities who are authorized by the IRS to assist applicants in obtaining ITINs and review and notarize the applicant’s documentation and forward applications to the IRS. Note that the IRS will shortly be requiring all acceptance agents to re-apply as acceptance agents which may reduce the number of such agents throughout the world.

Employer Identification Numbers (EINs)

EINs serve a similar purpose to Canadian Business Numbers. Before a Canadian corporation with a U.S. branch (or a U.S. subsidiary of a Canadian corporation) can obtain an EIN, a principal officer of the Canadian parent must first obtain an ITIN. This requirement can result in delays in obtaining the EIN, and can cause operating difficulties when opening U.S. bank accounts, etc.

Sending Employees to the U.S.

For assigned employees, the process of obtaining TINs is usually non-productive, frustrating and very time consuming. Such employees will find that common everyday tasks like opening joint U.S. bank accounts, obtaining driver’s licenses, etc. cannot be completed without TINs. Canadian assignment managers should ensure that their company’s assignment tax programs include assistance in obtaining TINs for assigned employees and family members.

For more information about applying for TINs (except SSNs) and our acceptance agent services, please contact Ms. Cindy Jay, C.A. at:

CompassTAX Tel: (403) 531-2200
Suite 600 , 1333 – 8 th Street SW Fax: (403) 263-1826
Calgary , Alberta, Canada
T2R 1M6

ompassTax™ assists Canadian companies and their expatriate employees with taxation issues that arise as a result of global assignments. CompassTax works with Canadian companies to design and implement expatriate tax programs, provides pre-departure tax counselling and tax return preparation services for expatriate and inbound employees.