IRS Form 6166: Certification of U.S. Tax Residency
The United States has negotiated tax treaties with numerous countries worldwide that can help U.S residents and companies who do business abroad. Reduced tax rates, exemption from double taxation, and other significant benefits can apply to various forms of international income, including employment wages, interest, and retirement income. For an individual or company to take advantage of treaty rates, they must first prove their U.S residency to the foreign government that has provided their income. That’s where Form 6166 comes in. Also known as a Certification of U.S. Tax Residency, this form confirms to treaty partners that the applicant has a legitimate claim to the benefits defined by the tax treaty. Keep reading for a closer look at IRS Form 6166 or use the links to jump to a specific section:
- What is Form 6166?
- Why File Form 6166?
- Who Is Eligible For Form 6166?
- Form 6166 Requirements
- Instructions for IRS Form 6166
What is Form 6166?Form 6166 is a letter printed on stationery from the U.S Department of Treasury used as proof to foreign governments that U.S residents are eligible to receive tax treaty benefits. To receive a Certification of U.S. Tax Residency, you have to send in Form 8802 with the appropriate personal information to the IRS. You cannot request Form 6166 without first filing Form 8802, and you must refile for every tax year you’re requesting the treaty benefits. Take a look at this example: John is an interior designer who traveled to Sweden several times in 2020 to work on a high-end restaurant chain. He was paid by a Swedish company for his services but can avoid the higher taxation rates of Sweden by claiming his U.S. residency. John now must show the Swedish government a residency certificate as proof that he is allowed to take advantage of the benefits for the tax year. If he plans to do more work in Sweden the next tax year, he will have to file another Form 6166. Typically, it takes 4-6 weeks to receive your U.S. Tax Residency Certificate. It’s important to note that you cannot file Form 6166 if you haven’t filed a required U.S. tax return or if you have filed a U.S tax return as a nonresident. For nonresident aliens working in the U.S, IRS Form W8 is used to report income regardless of your immigration status.
Why File Form 6166?It’s recommended to file Form 6166 if you or your company conducts business abroad. Numerous tax treaties between foreign countries and the U.S were negotiated to help you pay fewer taxes while you continue to handle business elsewhere. However, to take advantage of tax treaty benefits—lower tax rate, preventing double taxation, and more—you need to first confirm your eligibility by demonstrating proof of U.S. residency via a U.S. Residency Certificate, which is provided on Form 6166. Form 6166 can also allow you to receive an exemption from a Value Added Tax (VAT) imposed by a foreign country. A VAT is a form of consumption tax that is levied during every stage of the production process of a product. In the end, the final VAT affects the price of your product.
Who Is Eligible for Form 6166?Typically, the IRS will only issue a U.S Tax Residency Certificate if it can confirm that one of the following applies to the tax year you are requesting:
- You filed an appropriate income tax return based on your filing status (ex: individual, corporation, etc.)
- If you require a certification for a year in which a return isn’t due yet, you’ve filed a tax return for the most recent year in which a return was due
- You’re not required to file an income tax return for the requested tax period and other documentation is provided as proof
- You did not file a required U.S. tax return
- You filed a return as a nonresident
- You’re a dual-resident who has either made or plans to make the decision of not being a resident of the United States
- You’re a fiscally transparent entity organized in the United States and you don’t have any U.S. partners, beneficiaries, or owners
- The entity requesting certification is an exempt organization that is not based in the United States
- The entity requesting certification is a trust that is part of an employee benefit plan during its first year of existence, and it’s not administered by a qualified custodian bank
Form 6166 RequirementsOne of the major requirements to receive Form 6166 is to file Form 8802, which is the Application for United States Residency Certification. According to the IRS, this is a mandatory step. Don’t worry about having to file two separate forms. Simply fill out the checkbox on Form 8802 to receive additional applications of Form 6166. Furthermore, only authorized representatives, such as company officers, executives, and partners are allowed to sign Form 8802 to make Form 6166 valid.
Instructions for How to File IRS Form 6166Unlike most other forms from the IRS, Form 6166 does not require you to fill out line after line of personal information. The U.S Tax Residency Certificate is obtained through Form 8802, which has much more complex instructions and must be submitted with an $85 fee. Be sure to submit Form 8802 at least 45 days before you need the certificate. If there are any issues or delays with Form 8802, the IRS will contact you after 30 days. You can call (267) 941-1000 if you have any questions concerning your application. When you call, select the U.S. residency option. Additionally, the IRS will only process Form 8802 if it is postmarked on or after December 1st of the year before the tax year requested. For example, if you’re requesting tax treaty benefits for the 2021 tax year, the IRS will not accept Form 8802 if it’s received with a postmark date before December 1st, 2020. Once the IRS has mailed you Form 6166, you must get it authenticated for it to be valid in a foreign country. The legalization process is different in every country, but it always involves receiving various signatures and seals that are placed on the document to verify its origin. A more streamlined process, known as an apostille, is available if the foreign country is part of the Hague Convention, which removes the requirement for the legalization of foreign public documents.
How to File Form 6166 Electronically?To obtain a tax certification form, you must first submit Form 8802. Although there is no specific way to submit the form online, you can pay any associated fees via their secure government payment page. Once there, type “IRS Certs” in the search box and click continue on the first option. Make sure to have your bank account, debit card, or credit card information in hand before proceeding. You will also need to enter the following information:
- Applicant’s name and EIN/SSN
- Type of applicant
- Submitter name (this is whoever is submitting the payment)
- Contact email address and phone number
- Number of Forms submitted
- Payment amount
- Department of the Treasury Internal Revenue Service Philadelphia, PA 19255-0625
- Internal Revenue Service 2970 Market Street BLN# 3-E08.123 Philadelphia, PA 19104-5002
Where to Mail Form 6166?After receiving IRS Form 6166 in the mail, you can send it to the foreign withholding agent or other appropriate entity in the foreign country in which you’re claiming tax treaty benefits. Some countries will withhold tax at their own rates and refund you after receiving proof of U.S residency, while others will withhold tax at the treaty-reduced rates immediately. If you encounter any issues with the application process for Form 6166, consult an IRS tax advocate to assess your forms for any missing or incorrect information. When high foreign taxation rates are on the line, it’s critical to stay on top of deadlines, provide accurate information, and go through the proper channels so more of your international income can go into your pocket. Contact Community Tax for a free consultation today!