ITIN Application for Canadians: Do You Need to File a US Tax Return?

The US Individual Taxpayer Identification Number (ITIN) is a staple for Canadians looking to get into the lucrative US credit card market. As a primer, this is a number that identifies you to the Internal Revenue Service (IRS) of the US government and helps them keep track of taxpayers (or would-be taxpayers) in the US.

Having an ITIN is not a requirement to build credit, but it does help lenders and bureaus identify you, and is a requirement (in the place of a social security number or SSN) on most credit card applications.

To apply for an ITIN, the IRS stipulates that you belong to the one for the following categories

• Nonresident alien who is required to file a U.S. tax return
• U.S. resident alien who is filing a U.S. tax return
• Dependent or spouse of a U.S. citizen/resident alien
• Dependent or spouse of a nonresident alien visa holder
• Nonresident alien claiming a tax treaty benefit
• Nonresident alien student, professor or researcher filing a U.S. tax return or claiming an exception

They also mention that, in general, an ITIN application (Form W-7) should be accompanied by a valid U.S. individual income tax return, but that there are “limited circumstances under which an ITIN will be issued without an attached tax return”. 

Applying under an exception without a completed tax return has been the method most covered by other leading Canadian points bloggers. Unfortunately, this method is apparently no longer working now. However… 

Is applying for an ITIN under the treaty exception really dead? 

We have seen DPs of the Amazon ITIN and Smashwords ITIN method having less success as of late 2019  (although some people seem to be squeaking through the cracks still). Richard Klem has speculated about this since finding that 64% of applications were rejected in 2012.

Now I think I may have found another possible explanation for this change in the depths of the Acceptance Agent Training PowerPoint, accessible on the IRS Acceptance Agent program page.

“Reminders: Exception 1 (d) has been updated to indicate that 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.”

I am not sure just how literally to interpret this, but it could be that ITIN applications are being rejected specifically because they don’t have a postmarked envelope (Amazon usually only links you to a page that generates a generic letter that you then print yourself). 

So I emailed Amazon through the KDP contact form on the ITIN help page about this.

And their response…

Unfortunately, I did not receive the letter they allegedly sent, even after following up and being assured it was on its way by the KDP team. Therefore, I was unable to test whether this method would still work with an official postmarked letter.

This leaves me, and probably many others, highly curious. If any readers manage(d) to get the physical letter from Amazon and then apply for an ITIN using this method, please reply in the comments with your results.

To recap, the method of applying for an ITIN (W-7) using the Amazon KDP letter is as follows:

Open an account on Amazon’s Kindle Direct Publishing (KDP)

Contact the Amazon KDP team and request a letter
The letter needs to indicate to the IRS that you require an ITIN. See here for more details, and then use the contact form (select ‘Taxes’ and then ‘International tax withholding’). If you get directed to this page, you may be out of luck for the reasons listed above (but it may be worth trying again in a week or with a different agent).

While you wait for your letter to arrive, get Certified True Copies of your passport from Service Canada
See details on the Government of Canada website. It costs $45 for one, two, or three copies (get three). Note: you also have the option to send your actual passport to the IRS, who will then mail it back to you with your application result. If you take this route, skip this step.

Complete the Form W-7: Application for ITIN
Check boxes “a” and “h”. Fill in “h” with ‘Exception 1(d): Third-party withholding on passive income’. Enter “treaty country” as ‘Canada’ and “treaty article number” as ‘Article XII (12)’. Click here for a copy of a pre-filled application, and here for the full W-7 instructions for the W-7.

Package everything up and send to the IRS
Your package should include your letter from Amazon KDP, completed W-7 form, and original passport or certified true copy. Address it to:

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

Important: if you got a letter mailed to you from Amazon, include the envelope it came in as well, for reasons mentioned above!

For more detailed instructions, I recommend the Prince of Travel ITIN Tutorial.

All this being said, the future may be bleak for the Amazon ITIN method regardless, because an ITIN isn’t even required any longer for avoiding 30% withholding taxes from Amazon Direct Publishing.

So let’s discuss some of the other options…

Another way to apply for an ITIN: filing a complete US tax return (1040-NR)

As we mentioned, the alternative to applying for an ITIN with an exemption is to actually complete and file a tax return with your W7 form. The IRS stipulates that the ITIN is required to file a U.S. Non-Resident Tax Return. This is done by completing Form 1040-NR, and this is what you must do to get your ITIN this way.

Now, after the issues with getting ITINs through the exemption started, Jayce Loh from PointsNerd was quick to come up with a very viable solution in the form of claiming a small amount of US income and having a professional accountant complete your return (1040-NR) and ITIN application (W7) for you. The cost of this is currently $249+GST. 

While I absolutely agree that diversifying into the US card market is worth way more than $249, I have to say this is quite steep for what amounts to a fairly simple return… you’re claiming mere double digits in US income, no deductions, credits, or state taxes. 
If the only option available to you involves reading through this esoteric IRS documentation in order to fill out the 1040-NR form, then $249 is a steal.

But, if you’re the average Canadian, every year you probably file your taxes using TurboTax or some other user-friendly software,  which takes a whole 10 minutes to complete (YMMV). 

There are many of these exact same software applications, including TurboTax, available in the United States. It’s just a matter of finding ones that support the 1040-NR form. 

Unfortunately, the US version of TurboTax does not.

However, you’ll notice that a partner of TurboTax is mentioned. Sprintax in fact specializes in tax filing for nonresident aliens and foreign students. The program is not free, charging $40 USD for a 1040-NR. They also offer to include your W7 application for you for an additional $15 (note that this is only a one-page application and a pre-filled copy was included earlier in this post). 

Unfortunately, I went through the application and found it to be relatively inflexible. For example, I could not get it to move forward without having a generated Form 1099 or W-2, which of course I do not have.   

I would therefore only recommend using Sprintax if you’ve already been issued a Form 1099 or the like. In which case you are obligated to pay US taxes anyways!

If anyone has any crafty suggestions for how to get a Form 1099 generated, let us know in the comments. I know those Canadians who opened Chase bank accounts were being issued them, however it seems that you need an ITIN in order to open with Chase anyways (classic chicken-or-the-egg dilemma).  

A simpler solution from Frugal Flyer

Perhaps you want the best of both worlds – a reliable solution that is most likely to be accepted by the IRS but also doesn’t require you to go through the process of completing the full US tax return yourself or paying $250 for a professional tax service. 

We’ve worked with our technical team to develop a solution that will simplify this process for would-be ITIN applicants – for the average Canadian and with some caveats. 

Instead of completing your ITIN through tax software, you can use our form to answer a simplified set of questions – mostly personal details like name, address, etc. The form only takes about 10 minutes to complete.

From your responses, we will then generate the following:

1. A completed W7 form with all your information.
2. A completed 1040-NR tax return with all supporting information, including claiming your chosen amount of US income, ready to be attached and sent to the IRS.
3. A set of instructions explaining exactly what to include in the ITIN package and where to mail it. 

You will then be responsible for signing and mailing the application to the IRS, as well as any further follow-up.

For anyone interested, you can learn more and complete the ITIN request form here.

Closing thoughts

For Canadians, getting an ITIN and foraying into the U.S. credit card market is a more advanced strategy in the game of gaming credit cards, miles and points. It’s well worth it however, as the U.S. market is a behemoth compared to Canada’s, with greater competition and breadth of offers.

Even looking just at American Express: the number of cards and co-branded partners down there really trumps (pun not intended) what we have in Canada. Until now, our advantage was the ability to apply for the same cards multiple times. But with massive shutdowns reported in April 2020, it seems the golden days of Canadian Amex are numbered.

If that’s the case, diversifying into the U.S. market is only going to become a sweeter and sweeter option.