Canadian inheriting from US Do I need an ITIN?

jennie · Post by **jennie** » Wed Aug 12, 2015 12:38 am

I would appreciate if anyone knows the answer to this. I have read everything related to the ITIN and foreign beneficiaries on the IRS website but I find the wording over-complicated and very unclear to the average person, so I do not know if I need to get an ITIN as well as fill out the W-8BEN.
I am Canadian, living in Canada. My Step-Dad recently passed away. He was a US citizen who had lived and worked both in Canada as well as US. He retired back to the US. I am to inherit a small death benefit from the US and they have returned my forms to me telling me I also need an ITIN as well as the W-8BEN in order to lower the tax withholding rate. Is this correct? They say it takes 11 weeks to get an ITIN. The executor told me I had to do the W-8BEN but didnt mention getting an ITIN. Will I need the ITIN for the small RRIF located in Canada as well? Thank you.

nelsona · Post by **nelsona** » Wed Aug 12, 2015 9:32 am

The ITIN will only be for US income if you need to file a tax return, and you will only get it when you file that tax return, next spring. So there is no rush to get ITIN even if you eventually need it .

If you only need a W8-BEN (which is more likely) , then your Cdn tax number, your SIN is sufficient.

jennie · Post by **jennie** » Wed Aug 12, 2015 10:44 am

But the US organization (a professional association) to pay me the death benefit is telling me they won't pay the benefit without my putting an ITIN onto the application form.

nelsona · Post by **nelsona** » Wed Aug 12, 2015 3:42 pm

Then apply for an ITIN.

ND · Post by ND » Thu Aug 13, 2015 1:06 am

I've dealt with this same scenario before. Default withholding is 30% while a valid W-8BEN will allow them to withhold at only 15%. If you don't nip this in the bud, you'll need to file a tax return (after January) to claim a refund of over-withholdings, so best to save yourself that expense but making sure they get it right now.

You should prove to them from IRS literature that using current W-8BEN is acceptable w/o ITIN when listing your SIN, as Nelson commented. Be adamant that they accept this and comply with IRS procedure in this regard. Often they at first don't accept this out of fear, ignorance or following outdated IRS procedure for the former W-8BEN form.

jennie · Post by **jennie** » Sat Aug 15, 2015 11:49 am

Thanks ND. you suggest "proving to them from IRS literature that using current W-8BEN is acceptable without ITIN when listing my SIN". Good idea, if only I could understand their gobbledy gook language. This was the basis of my original question, that I find the language of the IRS publication way too complicated and unclear for the average person. If you can quote me a paragraph to use I would be very grateful. So far, I have spoken to a fiduciary, a couple of accountants, and an IRS International help-desk person and got different answers. I think the accumulated knowledge of this board is likely the best source of truth, given that I cannot understand the IRS language. I dont mind applying for the ITIN, even if it is not needed, despite the costs, inconvenience and time delay associated with the process, I just worry that if I do, when the SIN on the W-8BEN would have been sufficient, that somehow this might complicate things? Can you quote me a paragraph to use?

ND · Post by ND » Sat Aug 15, 2015 10:14 pm

Note that ITIN application eligibility is based upon exactly qualifying for finite IRS prescribed conditions and that IRS doesn't allow people to voluntarily apply, the latter definition includes applicants not fitting into the finite IRS prescribed conditions.

Pay a Toronto based CAA for assistance with either proving to your payer that you don't need one or helping you get one. If you message me, I'll give the contact info for one.

jennie · Post by **jennie** » Sun Aug 16, 2015 12:24 pm

thanks. It seems that private messaging has been disabled for the board. I don't know if you can name your Toronto recommendation within a post. If not, I will seek a CA/CPA with cross border experience and get personal advice.

maplecrossing · Post by **maplecrossing** » Mon Aug 17, 2015 12:56 pm

Hello, I am new to this forum. I am also a Canadian who inherited a small amount from my American stepmother. Bank of America withheld 30%. I have completed 2 W-8BEN forms and they have been rejected by BoA for the reason that the Article (XVIII) which I used in Part II question 10 was incorrect.

So I appeal to anyone who knows which Article of the income tax treaty between the US and Canada applies for the purpose of claiming 15% withholding for Canadians inheriting from Americans.

Much appreciated

nelsona · Post by **nelsona** » Mon Aug 17, 2015 1:30 pm

if you are no longer dealing with BoA, since they have already withheld the money, I wouldn't waste anymore time with them. The W8-BEN might have reduced the withholding, but that ship has sailed.

Focus on the 1040NR filing you wll do at year end.

But, if you really need help with another W8-BEN, you will need to specify what type of income you were getting from BoA. It is not clear that the income you were getting is pension income.

There is no such thing as inheritance tax, let alone a fixed withholding rate.

There is however withholding on distributions to a foreign person of an inherited pension, and, as I said, BoA seems to have already done this, so you can;t get it back from them at this point.