Question:
I am doing TIN Compliance at a bank in the Northern part of the U.S. and have come across an issue I could not resolve. We have customers that are Canadian Citizens. They have social security numbers and receive social security benefits. They say they don't pay taxes here. We have the accounts coded to suppress the 1099 and we issue a 1042S. I called the Internal Revenue Service to see if we are doing the reporting correctly and was told that even though the social security benefits were not taxable, any earned interest should be and they should be filing a US tax return. He also indicated that graduated tax rates are based on income and whether or not they are resident or nonresident aliens will play an important part in determining any tax liability. Is there a stated policy we should be enforcing with such customers? The IRS agent implied each case could be different and was unable to give me a definite answer. What documentation do we need in addition to the W8 Ben? Would putting their social security number on line 6 be sufficient? I just want to be sure we are reporting correctly and we have the needed documents. Thank you in advance for your assistance.
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