Does the client have to withhold taxes? US and non–US source income
Does your client have to withhold tax when they pay you? Only if some of the money you earned is US source income. For the purposes of editing, my understanding is that for nonresident aliens (non–US citizens who live outside the US), US source income is any work that you do while physically in the US. All the work that you do while outside the US is non–US source income.
As long as you’re not a US citizen and you live outside the US, your client should not withhold any of your non–US source income. You might even want to note clearly on every invoice that it is non–US source income.
Form W8-BEN: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)
If you have no US source income, your client may still want some documentation for their decision not to withhold income tax on your pay. In this case, you should fill out a W-8BEN. It’s simple: no ITIN required.
Form 8233: Exemption from Withholding
If you do some work while you are physically in the US, it may qualify as US source income, and you might need to fill out an exemption from withholding. Without this form, your client is required to withhold 30 percent of your pay, and you’ll have to file an income tax return to get it back. The form you need is IRS form 8233 “Exemption from Withholding,” in which you explain why the Canada-US tax treaty makes you exempt from withholding.
How to apply for an ITIN in Canada
If you need to fill out an 8233 or if you need to file an income tax return in the US, you’ll need an ITIN (individual taxpayer identification number). There are companies who offer to help you with the application, but it may be just as easy (and so much cheaper) to do it yourself. The application for an ITIN is IRS form W-7.
The difficult part is getting your identification certified. There are some Canadian notaries who are able to certify the document, but even then the document has to go the US consulate for verification. If there’s a US consulate within travelling distance, the easiest thing to do is to make an appointment with them for notarial services. Bring your completed W-7 form and your passport or other identification, and they’ll make a copy of your ID, attach it to the form, and get it certified by the consul. All you have to do is send it in with the form 8233 or the tax return (ITIN applications can only be submitted with one of these forms).