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  • Writer's pictureDaniel Gray CPA

Stuck in IRS ITIN no-man's land

Canadians inherit pensions of deceased US resident relatives such as Teachers Insurance and Annuity Association of America (TIAA).

 

IRS requires an ITIN letter saying the NRA already has (versus 'opening') an account that will (versus 'may') be subject to IRS withholding tax.

 

IRS ITIN application is open only to finite scenarios set by IRS and all other reasons are deemed not ITIN-worthy (think: Seinfeld's Elaine's sponge-worthy episode) meaning IRS decided you don't need an ITIN for tax purposes, irrelevant of your nursing school or state CPA license renewal insisting on receiving one.

 

TIAA used to issue such letter where an existing account of a deceased US resident transferred to a Canadian inheritor. Then IRS revamped the W-8BEN form to accept a Canadian SIN (or other country tax ID) as ‘FTIN”, thus eliminating the need for ITIN to establish a treaty based reduced withholding rate claim (and no need for creating new account). This led TIAA to refuse issuing such letters but the Canadian’s matter is resolvable via Form W-8BEN with SIN and ITIN not needed.

 

However, when the investment management firm instead seeks to create new accounts for the Canadian inheritors, this lands them in no-man’s land. The firm requires an ITIN to create the account and is unwilling to issue a letter bearing said required language (NRA already has an account that will be subject to IRS withholding tax). Sometimes an institution still will issue a letter - sometimes meeting above stated required wording and sometimes not and a weaker language letter (and certainly no letter) is unacceptable to IRS for it to issue an ITIN.

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