How to Obtain an Employer Identification Number (EIN) for a Canadian Company: A Step-by-Step Guide

Expanding your Canadian business into the U.S. market can be an exciting and strategic move, offering numerous opportunities to increase your customer base, streamline cross-border operations, and maximize your business potential. However, doing business in the U.S. requires careful planning, particularly in terms of understanding and meeting tax obligations. One of the essential requirements for Canadian companies doing business in the United States is obtaining an Employer Identification Number (EIN).

 

What is an EIN?

An Employer Identification Number (EIN) is a unique, nine-digit number assigned by the Internal Revenue Service (IRS) to identify businesses operating in the United States. It functions similarly to the Canadian Business Number (BN) and is required for various business activities, such as filing U.S. tax returns, opening a U.S. bank account, or hiring employees in the U.S. Without an EIN, your company may be subject to penalties and complications when dealing with U.S. customers or partners.

Why Does a Canadian Company Need an EIN?

There are several reasons why a Canadian company may need to obtain an EIN:

1. Serving U.S. Customers: If you have customers in the U.S., you may need an EIN to handle transactions and comply with local regulations.
2. Opening a U.S. Bank Account: An EIN is typically required to open a U.S. bank account, which allows you to manage U.S. payments more efficiently and streamline financial operations.
3. Operating with a U.S. Presence: If your company has a physical presence in the U.S., such as an office or warehouse, you will need an EIN for tax purposes.
4. Filing a U.S. Tax Return: Companies that earn income in the U.S. or have certain tax liabilities must file a U.S. tax return, such as Form 1120-F, and an EIN is necessary for this purpose.

How to Obtain an EIN for Your Canadian Business

Obtaining an EIN as a Canadian company is relatively straightforward, but there are a few steps and requirements to keep in mind. Below is a step-by-step guide to help you navigate the process:

1. Determine Your Eligibility

Before applying, ensure that your business qualifies for an EIN. A Canadian company can obtain an EIN even if it does not have a physical presence in the U.S. However, you must have a valid reason for requesting the EIN, such as the need to file a U.S. tax return or open a U.S. bank account.

2. Complete Form SS-4

The application for an EIN is made using Form SS-4, “Application for Employer Identification Number.” This form requires information about your business, such as its legal name, address, and the reason for applying for an EIN. You can download Form SS-4 from the IRS website.

When completing Form SS-4, pay special attention to the following fields:

• Line 7b: Enter your Canadian Business Number (BN) if applicable.
• Line 8a: Indicate whether your business has employees in the U.S.
• Line 10: State the reason for applying (e.g., “Compliance with IRS filing requirements”).

 

3. Choose Your Preferred Application Method

There are three ways to submit Form SS-4:

• By Phone: You can call the IRS at 1-267-941-1099 (not a toll-free number). This method is recommended for non-U.S. entities as it provides immediate processing. Have Form SS-4 completed and ready when you call.
• By Fax: Fax the completed Form SS-4 to 1-855-215-1627. If you choose this method, include a cover sheet with your contact details. It usually takes up to one week to receive the EIN confirmation by fax.
• By Mail: Mail the completed Form SS-4 to:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
USA

Processing by mail can take up to four weeks.

4. Wait for Confirmation

Once your application is submitted, it will take up to two weeks before your EIN becomes part of the IRS’s permanent records. You must wait until this occurs before you can:

• File an electronic tax return.
• Make electronic payments to the IRS.
• Pass an IRS Taxpayer Identification Number (TIN) matching program.

 

5. File U.S. Tax Returns (Form 1120-F)

If your Canadian company generates income in the U.S. or has certain U.S. tax obligations, you must file Form 1120-F, “U.S. Income Tax Return of a Foreign Corporation,” after the end of the fiscal year to meet compliance requirements and avoid penalties.

Final Thoughts

Obtaining an EIN is a crucial step for Canadian companies planning to expand their business into the U.S. market. The process is straightforward, but ensuring accuracy in your application and understanding your tax obligations will help you avoid complications down the line. Once you have obtained your EIN, you’ll be ready to take full advantage of the opportunities the U.S. market has to offer.

If you need assistance in applying for an EIN or understanding your U.S. tax responsibilities, feel free to reach out to a cross-border tax professional who can guide you through the process and help you stay compliant with IRS regulations.

Congratulations on taking this exciting step toward expanding your business in the U.S. market!