<?xml version="1.0" encoding="UTF-8"?><rss version="2.0" xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:wfw="http://wellformedweb.org/CommentAPI/" xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:atom="http://www.w3.org/2005/Atom" xmlns:sy="http://purl.org/rss/1.0/modules/syndication/" xmlns:slash="http://purl.org/rss/1.0/modules/slash/" > <channel> <title>US Individual Tax Archives - US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</title> <atom:link href="https://cbfinpc.com/category/us-individual-tax/feed/" rel="self" type="application/rss+xml" /> <link>https://cbfinpc.com/category/us-individual-tax/</link> <description>Online US & Canadian Tax Services</description> <lastBuildDate>Sun, 31 Dec 2023 02:19:10 +0000</lastBuildDate> <language>en-US</language> <sy:updatePeriod> hourly </sy:updatePeriod> <sy:updateFrequency> 1 </sy:updateFrequency> <generator>https://wordpress.org/?v=6.7.1</generator> <image> <url>https://cbfinpc.com/wp-content/uploads/2018/08/cropped-high-resolution-32x32.png</url> <title>US Individual Tax Archives - US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</title> <link>https://cbfinpc.com/category/us-individual-tax/</link> <width>32</width> <height>32</height> </image> <item> <title>Canadian Tax-Free Savings Accounts – Pitfalls on a U.S. Tax Return</title> <link>https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/</link> <comments>https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Sat, 30 Dec 2023 16:48:38 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[Tax-Free Savings Accounts]]></category> <category><![CDATA[US and Canadian Individual]]></category> <category><![CDATA[US Individual Tax]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=5309</guid> <description><![CDATA[<p>Financial planning involves understanding various savings and investment accounts. Each account has unique rules and benefits. The Tax-Free Savings Account (TFSA) is popular among Canadians. Yet, it becomes more complex when dealing with cross-border tax rules. In this blog post, we will explore the intricacies of the Canadian TFSA. We will compare it with the […]</p> <p>The post <a href="https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/">Canadian Tax-Free Savings Accounts – Pitfalls on a U.S. Tax Return</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[ <p><span data-color="transparent" style="background-color: transparent;color: inherit">Financial planning involves understanding various savings and investment accounts. Each account has unique rules and benefits. The Tax-Free Savings Account (TFSA) is popular among Canadians. Yet, it becomes more complex when dealing with cross-border tax rules. In this blog post, we will explore the intricacies of the Canadian TFSA. We will compare it with the U.S. Roth Individual Retirement Account (IRA). We will discuss its benefits, rules for non-residents, and U.S. tax implications. This guide will help Canadian citizens living in the U.S. manage their TFSA. It will also help Americans with Canadian investments manage their TFSA.</span></p> <h2 class="wp-block-heading" id="h-what-is-a-tax-free-savings-account"><span data-color="transparent" style="background-color: transparent;color: inherit">What is a Tax-Free Savings Account?</span></h2> <p><span data-color="transparent" style="background-color: transparent;color: inherit">A Tax-Free Savings Account (TFSA) is a Canadian financial account. It’s designed for Canadians to save money tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes. But, any amount contributed and income earned in the account is generally tax-free. This includes investment income and capital gains. It also applies when someone withdraws it.</span></p> <h2 class="wp-block-heading" id="h-who-can-open-a-tax-free-savings-account">Who Can Open a Tax-Free Savings Account?</h2> <p>Any individual who is 18 years of age or older individual with a valid social insurance number (SIN) can open a TFSA. Furthermore, it’s critical to note that, unlike certain other types of accounts, there is no requirement to earn income to contribute to a TFSA. Therefore, it can be an excellent tool for students, stay-at-home parents, or retirees to grow their savings. Additionally, an individual can have more than one TFSA, but the total amount contributed to all TFSAs cannot exceed the individual’s available TFSA contribution room for that year.</p> <h2 class="wp-block-heading" id="h-tfsa-contribution-limit">TFSA Contribution Limit</h2> <p>The amount you can contribute to a TFSA depends on the annual contribution limit set by the Canada Revenue Agency (CRA). For 2023, the TFSA contribution limit is $6,500. However, your total contribution limit may be higher if you haven’t reached your maximum in previous years since the TFSA was introduced in 2009. The contribution room is cumulative and can be carried forward to future years if unused.</p> <p>It’s essential to remember that over-contributing to your TFSA can result in a penalty from the CRA. The penalty is typically 1% of the highest excess TFSA amount for each month, and the extra amount remains in your account. </p> <h2 class="wp-block-heading" id="h-tax-free-savings-account-and-the-canada-u-s-tax-treaty">Tax-Free Savings Account and the Canada-U.S. Tax Treaty</h2> <p>The Canada-U.S. Tax Treaty aims to prevent double taxation of individuals residing in either or both countries. However, it’s crucial to note that the TFSA is not recognized as a pension under Article XVIII of the Canada-U.S. Tax Treaty. As a result, while the interest, dividends, and capital gains generated within a TFSA are tax-free in Canada, they may not be tax-free in the U.S., especially for U.S. citizens or residents holding TFSAs.</p> <p>Any income earned within a TFSA could be subjected to U.S. tax, making the account considerably less beneficial for those living in the U.S. or U.S. citizens residing in Canada. It is essential to consider these implications before investing in a TFSA, especially for those with cross-border tax obligations. You can always consult with a cross-border tax professional to understand the best savings or investment strategy for your specific situation.</p> <h2 class="wp-block-heading" id="h-comparing-canadian-tfsa-and-u-s-roth-individual-retirement-account-ira"><strong><span data-color="transparent" style="background-color: transparent;color: inherit">Comparing Canadian TFSA and U.S. Roth Individual Retirement Account (IRA)</span></strong></h2> <p><span data-color="transparent" style="background-color: transparent;color: inherit">A Canadian Tax-Free Savings Account (TFSA) is like a U.S. Roth Individual Retirement Account (IRA). Both accounts allow individuals to invest post-tax income. They can then withdraw the earnings tax-free. Despite the similarities, there are key differences. These include contribution limits, withdrawal rules, and specific tax advantages. Both are tools for financial growth and retirement planning. However, their use depends on individual financial situations and goals.</span></p> <h2 class="wp-block-heading" id="h-benefits-of-a-canadian-tfsa"><strong><span data-color="transparent" style="background-color: transparent;color: inherit">Benefits of a Canadian TFSA</span></strong></h2> <p><span data-color="transparent" style="background-color: transparent;color: inherit">The benefits of a TFSA are manifold. First, the flexible withdrawal rules allow Canadians to access their savings at various points without a penalty. This is a significant advantage for those needing access to their funds before retirement. Another important benefit is that income earned within the account is generally tax-free, even upon withdrawal. It allows for the potential of tax-free growth over time, which could significantly increase one’s savings.</span></p> <h2 class="wp-block-heading" id="h-tfsa-rules-for-non-residents-of-canada"><strong><span data-color="transparent" style="background-color: transparent;color: inherit">TFSA Rules for Non-Residents of Canada</span></strong></h2> <p><span data-color="transparent" style="background-color: transparent;color: inherit">Non-residents of Canada can still hold a Tax-Free Savings Account (TFSA). They may even be able to contribute to it. However, navigating the rules can be complex. If you become a non-resident and contribute to your TFSA, you will be subject to a 1% tax for each month the contribution stays in the account. This rule discourages non-residents from gaining tax advantages while not living in Canada. Non-residents should seek advice from a tax professional. This is a good idea because it helps them understand their situation and avoid unnecessary penalties.</span></p> <h2 class="wp-block-heading" id="h-u-s-tax-implications-of-canadian-tfsas-what-you-need-to-know"><strong><span data-color="transparent" style="background-color: transparent;color: inherit">U.S. Tax Implications of Canadian TFSAs: What You Need to Know</span></strong></h2> <p><span data-color="transparent" style="background-color: transparent;color: inherit">Important U.S. tax implications of Canadian Tax-Free Savings Accounts (TFSAs) exist. We shouldn’t overlook them. Here are three key points to keep in mind:</span></p> <ul class="wp-block-list"> <li><p><span data-color="transparent" style="background-color: transparent;color: inherit">TFSA earnings are subject to U.S. income tax. You must include any earnings from your TFSA as taxable income on your <a href="https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/">U.S. income tax return</a>, and a direct foreign tax credit cannot be recouped as there is no Canadian tax incurred on them.</span></p></li> <li><p><span data-color="transparent" style="background-color: transparent;color: inherit">Special filing requirements apply to specific investments. You may need to file a separate form, Form 8621, with your Form 1040 if the TFSA invests in a passive foreign investment company (PFIC). Do this if you have mutual funds or other passive foreign investment companies.</span></p></li> <li><p><span data-color="transparent" style="background-color: transparent;color: inherit">More information returns may be necessary. The amounts and types of investments in your TFSA determine if you must file special information returns. As a TFSA is a foreign financial account, you must file under <a href="https://cbfinpc.com/11-things-canadians-should-know-about-fbars-cross-border-financial/">FBAR</a> and FATCA regulations. These reports must be submitted to the IRS. They must also be submitted to the Financial Crimes Enforcement Network (FinCEN).</span></p></li> </ul> <p><span data-color="transparent" style="background-color: transparent;color: inherit">U.S. filers need to <a href="https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/">consider these tax implications</a>. It’s essential to evaluate the benefits of Canadian TFSAs. These accounts are taxable in the U.S. They could also trigger the need to file additional forms with the Internal Revenue Service and FinCEN.</span></p> <p><span data-color="transparent" style="background-color: transparent;color: inherit">In conclusion, the Canadian Tax-Free Savings Account (TFSA) offers significant tax advantages in Canada. But, its benefits may not extend to those residing in the U.S. or non-residents of Canada. Differences in tax laws and extra reporting requirements can complicate matters. They could offset the tax benefits of a TFSA. So, anyone in these situations should seek professional tax advice before making decisions. Understanding the complexities of cross-border taxation is crucial. It helps you maximize the benefit of your investments and avoid unnecessary penalties.</span></p> <h2 class="wp-block-heading" id="h-need-help-from-a-cross-border-tax-preparer-in-toronto-or-oakville-ontario"><strong>Need Help from a Cross-Border Tax Preparer in Toronto or Oakville, Ontario?</strong></h2> <p class="has-text-align-start"><p style="text-align: start" class=" "><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on </em><a target="_blank" rel="noreferrer noopener" href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true"><em>Linkedin</em></a><em> and </em><a target="_blank" rel="noreferrer noopener" href="https://twitter.com/CrossBorder_Fin"><em>Twitter</em></a><em>, or hang out on </em><a target="_blank" rel="noreferrer noopener" href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour"><em>Facebook.</em></a></p></p> <p class="has-text-align-start"><p style="text-align: start" class=" ">The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</p></p> <h2 class="wp-block-heading" id="h-get-started-working-with-us-by-clicking-nbsp-here-submit-the-form-to-receive-a-link-to-schedule-a-meeting"><strong>Get started working with us by clicking </strong><a target="_blank" rel="noreferrer noopener" href="https://cbfinpc.com/intake-tax-docs-consultation/"><strong>here</strong></a><strong>. Submit the form to receive a link to schedule a meeting.</strong></h2> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&linkname=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&linkname=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&linkname=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&linkname=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&linkname=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fcanadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return%2F&title=Canadian%20Tax-Free%20Savings%20Accounts%20%E2%80%93%20Pitfalls%20on%20a%20U.S.%20Tax%20Return" data-a2a-url="https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/" data-a2a-title="Canadian Tax-Free Savings Accounts – Pitfalls on a U.S. Tax Return"></a></p><p>The post <a href="https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/">Canadian Tax-Free Savings Accounts – Pitfalls on a U.S. Tax Return</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> <wfw:commentRss>https://cbfinpc.com/canadian-tax-free-savings-accounts-pitfalls-on-a-u-s-tax-return/feed/</wfw:commentRss> <slash:comments>0</slash:comments> </item> <item> <title>The Taxation of OAS and CPP Payments for Canadians on a U.S. Tax Return</title> <link>https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/</link> <comments>https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Wed, 27 Dec 2023 16:43:25 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[US Individual Tax]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=5298</guid> <description><![CDATA[<p>Navigating the tax landscape for Canadians filing a U.S. tax return can be a challenging endeavor due to the intricate interplay between the tax laws of both countries. This article aims to shed light on the tax implications for Old Age Security (OAS) and Canada Pension Plan (CPP) payments for such individuals. We will delve […]</p> <p>The post <a href="https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/">The Taxation of OAS and CPP Payments for Canadians on a U.S. Tax Return</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[ <p>Navigating the tax landscape for Canadians filing a U.S. tax return can be a challenging endeavor due to the intricate interplay between the tax laws of both countries. This article aims to shed light on the tax implications for Old Age Security (OAS) and Canada Pension Plan (CPP) payments for such individuals. We will delve into how these benefits are taxed, the significance of the tax treaty between the U.S. and Canada, some of the forms required for reporting these benefits, and the necessity of professional tax advice for informed decision-making. Be aware that while our goal is to provide a broad understanding, tax situations vary significantly and professional advice is paramount for accurate reporting and compliance.</p> <h2 class="wp-block-heading" id="h-the-taxation-of-old-age-security-oas-and-canada-pension-plan-cpp-payments-to-canadians-on-a-u-s-tax-return">The Taxation of Old Age Security (OAS) and Canada Pension Plan (CPP) Payments to Canadians on a U.S. Tax Return</h2> <p>As a Canadian resident reporting on a US tax return, it’s vital to understand how taxation works for OAS and CPP payments. Generally, these benefits are taxable by the Canadian government. For US tax purposes, however, the rules differ. The tax treaty between the U.S. and Canada allows these benefits to be taxed only in the country of residence, which means a Canadian resident receiving OAS and CPP may not be subject to taxation in the United States.</p> <h2 class="wp-block-heading" id="h-reporting-old-age-security-oas-and-canada-pension-plan-cpp-payments-on-a-u-s-tax-return">Reporting Old Age Security (OAS) and Canada Pension Plan (CPP) Payments on a U.S. Tax Return</h2> <p>While OAS and CPP payments are typically not subject to U.S. tax for a Canadian resident, they still must be reported on a <a href="https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/">U.S. tax return</a> if the individual is a U.S. citizen or resident. The U.S. taxes its citizens and residents on their worldwide income. Therefore, these benefits should be reported on <a href="https://cbfinpc.com/us-form-1040-income-tax-return-preparation/">Form 1040</a>, the U.S. Individual Income Tax Return.</p> <h2 class="wp-block-heading" id="h-form-8833-treaty-based-return-position-disclosure-for-oas-and-cpp">Form 8833, Treaty-Based Return Position Disclosure for OAS and CPP</h2> <p>Form 8833, <em>Treaty-Based Return Position Disclosure</em>, comes into play when a taxpayer takes a position that a U.S. tax law contradicts the provisions of a tax treaty, resulting in a reduced rate or exemption from tax. A Canadian resident receiving OAS and CPP benefits may need to file Form 8833 if they claim a treaty position that these benefits are exempt from U.S. tax. It’s important to remember that tax situations can be complex and unique to each individual. Therefore, professional tax advice should be obtained before filing any forms or making tax-related decisions.</p> <p>In conclusion, understanding the taxation of OAS and CPP payments for Canadians living in the U.S. is a complex process that involves navigating both U.S. and Canadian tax laws. Although the tax treaty between these countries helps mitigate double taxation, reporting regulations still apply. Individuals in this situation should seek professional advice, considering the specificities of each case. Remember, reliable and accurate tax reporting is a legal responsibility, and ensuring compliance requires a thorough understanding of these intricate tax laws.</p> <h2 class="wp-block-heading" id="h-need-help-from-a-cross-border-tax-preparer-in-toronto-or-oakville-ontario"><strong><strong class="tdfocus-1703695393047">Need Help from a Cross-Border Tax </strong><strong>Preparer</strong><strong class="tdfocus-1703695393047"> in Toronto or Oakville, Ontario?</strong></strong></h2> <p><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on </em><a target="_blank" rel="noreferrer noopener" href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true"><em>Linkedin</em></a><em> and </em><a target="_blank" rel="noreferrer noopener" href="https://twitter.com/CrossBorder_Fin"><em>Twitter</em></a><em>, or hang out on </em><a target="_blank" rel="noreferrer noopener" href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour"><em>Facebook.</em></a></p> <p>The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</p> <h2 class="wp-block-heading" id="h-get-started-working-with-us-by-clicking-nbsp-here-submit-the-form-to-receive-a-link-to-schedule-a-meeting"><strong>Get started working with us by clicking </strong><a target="_blank" rel="noreferrer noopener" href="https://cbfinpc.com/intake-tax-docs-consultation/"><strong>here</strong></a><strong>. Submit the form to receive a link to schedule a meeting.</strong></h2> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&linkname=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&linkname=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&linkname=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&linkname=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&linkname=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fthe-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return%2F&title=The%20Taxation%20of%20OAS%20and%20CPP%20Payments%20for%20Canadians%20on%20a%20U.S.%20Tax%20Return" data-a2a-url="https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/" data-a2a-title="The Taxation of OAS and CPP Payments for Canadians on a U.S. Tax Return"></a></p><p>The post <a href="https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/">The Taxation of OAS and CPP Payments for Canadians on a U.S. Tax Return</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> <wfw:commentRss>https://cbfinpc.com/the-taxation-of-oas-and-cpp-payments-for-canadians-on-a-us-tax-return/feed/</wfw:commentRss> <slash:comments>0</slash:comments> </item> <item> <title>How to File a U.S. Tax Return from Canada as an American?</title> <link>https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/</link> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Wed, 13 Dec 2023 16:12:02 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[US and Canadian Individual]]></category> <category><![CDATA[US Individual Tax]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=5281</guid> <description><![CDATA[<p>Navigating the taxation landscape as a U.S. citizen living in Canada can be complex and challenging. The tax systems in both countries have their own unique requirements and deadlines, and understanding them is crucial to ensure accurate reporting and prevent penalties. This blog post aims to provide a comprehensive overview of common errors on U.S. […]</p> <p>The post <a href="https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/">How to File a U.S. Tax Return from Canada as an American?</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[ <p>Navigating the taxation landscape as a U.S. citizen living in Canada can be complex and challenging. The tax systems in both countries have their own unique requirements and deadlines, and understanding them is crucial to ensure accurate reporting and prevent penalties. This blog post aims to provide a comprehensive overview of common errors on U.S. expat tax returns, the inclusion of Canadian mutual funds, a Canadian TFSA, or a Canadian RESP on U.S. tax returns, tax filing obligations and the deadlines for both U.S. and Canadian tax returns. Whether you’re a U.S. citizen residing in Canada or a tax professional assisting such individuals, the information shared here will be of great value.</p> <h2 class="wp-block-heading" id="h-do-i-have-to-file-u-s-taxes-if-i-live-in-canada">Do I Have to File U.S. Taxes if I Live in Canada?</h2> <p>American citizens residing in Canada are still obligated to file U.S. income tax returns every year if they meet the U.S. tax filing requirements and thresholds. They must report all income from all global sources on their U.S. return. Additionally, U.S. citizens living in Canada may also be required to file a <a href="https://cbfinpc.com/11-things-canadians-should-know-about-fbars-cross-border-financial/">Foreign Bank and Financial Accounts Report (FBAR)</a> if they have more than $10,000 in financial accounts outside the U.S at any time during the year. Furthermore, they are also potentially eligible to claim the <a href="https://cbfinpc.com/foreign-earned-income-exclusion/">Foreign Earned Income Exclusion (FEIE)</a>, which can exclude a part of foreign earned income from U.S. tax. However, to claim the FEIE, taxpayers must file their U.S. tax return. Lastly, due to tax treaties between Canada and the U.S., usually, they can claim a<a href="https://cbfinpc.com/how-us-foreign-tax-credits-may-work-to-keep-money-in-the-pocket-of-a-canadian-filing-a-us-tax-return/"> foreign tax credit</a> on their U.S. return for Canadian income taxes they paid, avoiding being double taxed.</p> <h2 class="wp-block-heading" id="h-basics-of-canadian-taxes-for-u-s-citizens">Basics of Canadian Taxes for U.S. citizens</h2> <p>In Canada, individuals need to file a T1 General tax return annually if they receive income during the year. This return covers common types of income including employment income, investment income, and government benefits. For self-employed individuals or those who have business income, they also report this on the T1 General tax return filing once. Additionally, individuals residing in Quebec are required to file a separate provincial tax return due to its unique tax laws. It’s important to note that the tax year in Canada, like the U.S., is from January 1 to December 31, and the deadline for filing is typically April 30 of the following year.</p> <h2 class="wp-block-heading" id="h-foreign-asset-reporting-for-canadians">Foreign Asset Reporting for Canadians</h2> <p>Canadian residents with foreign income or property may be required to file Form T1135, Foreign Income Verification Statement, with their annual tax return. This form must be filled out by individuals who own foreign property with a total cost of more than CAD $100,000 at any point during the tax year. The form asks for detailed information about each foreign property, including the country where it’s located, any income it produced, and its maximum cost during the year. It’s crucial for Canadians with foreign property to understand their obligations, as penalties for non-compliance can be severe.</p> <h2 class="wp-block-heading" id="h-foreign-asset-reporting-for-americans">Foreign Asset Reporting for Americans</h2> <p>Americans residing abroad have the responsibility to report their foreign income and assets through various tax forms. Generally, they must file a U.S. Individual <a href="https://cbfinpc.com/service/us-form-1040-income-tax-return-preparation/">Income Tax Return (Form 1040)</a>, even if they owe no tax because of the Foreign Earned Income Exclusion or claiming foreign tax credits. If their foreign bank and financial account balances exceed $10,000 at any time during the year, they will also need to submit a Foreign Bank Account Report (FBAR, FinCEN Form 114). For those with specified foreign financial assets that meet a certain threshold, a <a href="https://cbfinpc.com/reporting-canadian-and-other-foreign-accounts-in-the-u-s-a-comparison-of-u-s-fbar-fatca-reporting-requirements/">Statement of Specified Foreign Financial Assets (Form 8938) </a>is also required under the Foreign Account Tax Compliance Act (FATCA). Similarly, if foreign taxes were paid, a Foreign Tax Credit (Form 1116) may be filed to avoid double taxation. Ensure to consult with a tax professional or the IRS for specific filing requirements as they can vary based on individual circumstances.</p> <figure class="wp-block-image"><img fetchpriority="high" decoding="async" width="1080" height="1080" src="https://cbfinpc.com/wp-content/uploads/2023/12/image.png" alt="" class="wp-image-5283" srcset="https://cbfinpc.com/wp-content/uploads/2023/12/image.png 1080w, https://cbfinpc.com/wp-content/uploads/2023/12/image-150x150@2x.png 300w, https://cbfinpc.com/wp-content/uploads/2023/12/image-1024x1024.png 1024w, https://cbfinpc.com/wp-content/uploads/2023/12/image-150x150.png 150w, https://cbfinpc.com/wp-content/uploads/2023/12/image-400x400.png 400w, https://cbfinpc.com/wp-content/uploads/2023/12/image-92x92.png 92w, https://cbfinpc.com/wp-content/uploads/2023/12/image-600x600.png 600w, https://cbfinpc.com/wp-content/uploads/2023/12/image-100x100.png 100w" sizes="(max-width: 1080px) 100vw, 1080px" /></figure> <h2 class="wp-block-heading" id="h-common-u-s-tax-forms-and-schedules-required-for-expats">Common U.S. Tax Forms and Schedules Required for Expats</h2> <p>U.S. expatriates generally file various tax forms to accurately report their income and assets to tax residents. These forms include:</p> <ul class="wp-block-list"> <li><p><strong>Form 1040</strong>: The standard U.S. Individual Income Tax Return, where all types of income, deductions, and credits are reported.</p></li> <li><p><strong>Schedule A</strong>: This form is used to itemize deductions and includes medical and dental expenses, taxes paid, interest paid, gifts to charity, casualty and theft losses, and other miscellaneous deductions.</p></li> <li><p><strong>Schedule B</strong>: Expats use this form to report interest and ordinary dividends.</p></li> <li><p><strong>Schedule C</strong>: This is used to report income or loss from a business you operated or a profession you practiced as a sole proprietor.</p></li> <li><p><strong>Schedule D</strong>: Used to report capital gains and losses from the sale of assets.</p></li> <li><p><strong>Schedule E</strong>: This form is for reporting supplemental income and loss, such as rental real estate, royalties, and income from partnerships, S corporations, estates, and trusts.</p></li> <li><p><strong>Schedule F</strong>: U.S. citizens with farm income use this form to report their profit or loss.</p></li> <li><p><strong>Schedule SE</strong>: Self-Employment Tax is reported on this form.</p></li> <li><p><strong>Form 1116</strong>: This form is used by U.S. citizens living abroad to avoid double taxation. It enables them to claim the Foreign Tax Credit for income taxes paid to a foreign country.</p></li> </ul> <p>Each of these forms requires different information and pertains to different types of income, deductions, and credits. Therefore, U.S. citizens living abroad should take the time to understand each form and its unique requirements. Consider seeking professional tax advice to ensure accurate and complete tax reporting.</p> <h2 class="wp-block-heading" id="h-other-u-s-tax-forms-and-schedules-required-for-expats">Other U.S. Tax Forms and Schedules Required for Expats</h2> <p>Apart from the aforementioned forms, American individuals might also need to file additional IRS forms based on their specific circumstances. For instance:</p> <ul class="wp-block-list"> <li><p class="tdfocus-1702427223407"><strong>Form 2555</strong>: For claiming the Foreign Earned Income <span style="background-color: rgba(0, 0, 0, 0.2); font-size: revert; color: initial;">Exclusion</span><span style="font-size: revert; background-color: rgb(255, 255, 255); color: initial;">, this form is for U.S. citizens who meet certain requirements and want to exclude foreign earned income from their U.S. taxable income.</span></p></li> <li><p class="tdfocus-1702427277523"><strong>Form 8960</strong>: Titled Net Investment Income Tax— is used by individuals <span style="background-color: rgb(255, 255, 255); color: initial; font-size: revert;">to calculate Net Investment Income Tax.</span></p></li> <li><p><strong>Form 6251</strong>: Individuals Alternative Minimum Tax— Individuals is used to calculate the alternative minimum tax. It is primarily meant for higher income individuals who claim certain deductions and credits that can significantly reduce their regular tax.</p></li> <li><p><strong>Form 5329</strong>: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. This form is used to report additional taxes on the distributions from traditional IRAs or other tax-favored accounts.</p></li> <li><p><strong>Form 8938</strong>: Statement of Specified Foreign Financial Assets. Required by the Foreign Account Tax Compliance Act (FATCA), this form is used to report specified foreign financial assets if the total value exceeds the appropriate reporting threshold.</p></li> </ul> <p>These forms serve unique purposes and cater to specific financial circumstances. Therefore, understanding their individual requirements is crucial. As always, consulting with a tax advisor or professional is highly recommended to ensure accurate tax reporting.</p> <figure class="wp-block-image"><img decoding="async" width="1080" height="1080" src="https://cbfinpc.com/wp-content/uploads/2023/12/image-3.png" alt="" class="wp-image-5286" srcset="https://cbfinpc.com/wp-content/uploads/2023/12/image-3.png 1080w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-150x150@2x.png 300w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-1024x1024.png 1024w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-150x150.png 150w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-400x400.png 400w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-92x92.png 92w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-600x600.png 600w, https://cbfinpc.com/wp-content/uploads/2023/12/image-3-100x100.png 100w" sizes="(max-width: 1080px) 100vw, 1080px" /></figure> <h2 class="wp-block-heading" id="h-common-canadian-tax-forms-and-schedules">Common Canadian Tax Forms and Schedules</h2> <p>Canadian individuals, like their American counterparts, must also appropriately file a variety of tax forms based on their income sources, deductions, and credits. The key form is the <strong>T1 General Return</strong>, which is used to report various types of income, deductions, and tax credits.</p> <ul class="wp-block-list"> <li><p><strong>Schedule 1</strong>: This form is used to calculate federal tax and encompasses details of income from different sources, along with deductions applicable.</p></li> <li><p><strong>Schedule 2</strong>: Individuals who need to pay provincial or territorial taxes use this form, except for residents of Quebec, who must submit a separate provincial return due to Quebec’s unique tax laws.</p></li> <li><p><strong>Schedule 3</strong>: This form is for reporting capital gains or losses from the sale of assets.</p></li> <li><p><strong>Schedule 4</strong>: This is used to list investment income and expenses, such as dividends, interest, and carrying charges.</p></li> <li><p><strong>Schedule 5</strong>: Details of dependent spouses or common-law partners, and dependent children are documented in this form.</p></li> <li><p class="tdfocus-1702427406204"><strong>Schedule 7</strong>: This form is for RRSP, and HBP or LLP Activities, which involve retirement savings plans.</p></li> <li><p><strong>Schedule 9</strong>: Donations and Gifts are listed on this form to claim a tax credit.</p></li> <li><p><strong>Form T1135</strong>: This form is required for Canadian residents who own foreign property with a total cost of more than CAD $100,000 at any point during the year. The form reports detailed information about each foreign property.</p></li> </ul> <p>Each of these forms has unique requirements and pertains to different types of income and deductions. Therefore, Canadian residents should ensure they understand the requirements of each form. Consulting each filing form with a tax professional is highly recommended to ensure accurate tax reporting.</p> <h2 class="wp-block-heading" id="h-understanding-irs-form-1116-and-its-completion-for-canadians">Understanding IRS Form 1116 and Its Completion for Canadians</h2> <p>Form 1116 is an IRS (Internal Revenue Service) document used by U.S. citizens or residents who paid foreign income taxes to a foreign government due to the income they earned in that foreign country. It is primarily used to claim the Foreign Tax Credit (FTC) to offset the U.S. tax liability, preventing double taxation. For Canadians, here’s how to complete Form 1116:</p> <ol class="wp-block-list"> <li><p><strong>Prepare Necessary Documentation:</strong> Gather all necessary financial documents that show your foreign-earned income and the amount of Canadian income tax paid.</p></li> <li><p><strong>Identify the Category of Income:</strong> On Form 1116, classify the type of income for which you are claiming the credit. Income can be classified as passive (such as interest, dividends, royalties), general category income (wages, salaries, self-employment), or other specific categories.</p></li> <li><p><strong>Enter Foreign Source Income and Taxes Paid:</strong> Fill in the total amount of foreign income earned and the taxes paid to Canada. This information should be converted to U.S. dollars using the yearly average exchange rate.</p></li> <li><p><strong>Calculate the FTC:</strong> The credit is the lower of the Canadian tax paid or the U.S. tax liability on the foreign income. Enter this amount in the credit calculation section of the form.</p></li> <li><p><strong>Carryover or Carryback:</strong> If the credit calculated exceeds the U.S. tax liability, you can carry back one year and carry over the excess credit for ten years.</p></li> <li><p><strong>Attach to Form 1040:</strong> Once completed, attach Form 1116 to your Form 1040 when filing your U.S. tax return.</p></li> </ol> <p>Due to the complexities associated with international tax law and potential errors in completing Form 1116, it is highly recommended to seek professional tax advice when claiming the Foreign Tax Credit.</p> <h2 class="wp-block-heading" id="h-common-errors-on-u-s-expat-returns">Common Errors on U.S. Expat Returns</h2> <p>Common errors on U.S. expat tax returns can lead to complications ranging from penalties to audits. One of the most common mistakes made regarding tax residency by U.S. expats is failing to file a return, thinking they’re exempt due to residing abroad. However, the U.S. operates on a citizen-based taxation system, meaning all U.S. citizens are required to file a tax return, regardless of where they live.</p> <p>Another common error is failing to report all sources of income, including foreign-earned income and income from foreign investments. Even if this income is taxed in the foreign country, it must still be reported on the U.S. tax return.</p> <p>Misunderstanding the Foreign Earned Income Exclusion (FEIE) is another pitfall. This provision allows qualifying taxpayers to exclude a certain amount of foreign earnings from U.S. taxation but expats often make the mistake of incorrectly claiming this exclusion.</p> <p>Failure to file FATCA (Form 8938) or FBAR (Report of Foreign Bank and Financial Accounts) can also be problematic. These forms are required for U.S. persons who have foreign financial assets or foreign bank accounts meeting certain thresholds.</p> <p>Finally, additional errors can occur due to the complexity of the tax code and the difficulty of accurately translating and converting foreign income and taxes into U.S. dollars. These errors underline the importance of consulting with a tax professional when preparing a U.S. expat tax return.</p> <h2 class="wp-block-heading" id="h-are-canadian-mutual-funds-a-canadian-tfsa-or-a-canadian-resp-earnings-included-on-a-my-u-s-tax-return">Are Canadian mutual funds, a Canadian TFSA, or a Canadian RESP Earnings Included on a my U.S. tax return?</h2> <p>Yes, as a U.S. citizen living in Canada, it’s essential to understand that you are required to report your worldwide income to the IRS, which includes income from Canadian mutual funds, a Tax-Free Savings Account (TFSA), and a Registered Education Savings Plan (RESP).</p> <ul class="wp-block-list"> <li><p><strong>Canadian Mutual Funds:</strong> These are considered as Passive Foreign Investment Companies (PFICs) by the IRS, and income from these funds must be reported on Form 8621. These can be quite complex to deal with in terms of U.S. tax due to special tax and reporting rules.</p></li> <li><p class="tdfocus-1702427547507"><strong>TFSA:</strong> The IRS does not recognize the tax-free status of TFSAs, and as such, income earned in a TFSA is taxable on your U.S. tax return. </p></li> <li><p><strong>RESP:</strong> While Canadian tax law allows tax-deferred growth within RESPs and tax-free withdrawals when the funds are used for education, the IRS does not recognize these tax benefits. Consequently, earnings within the RESP are subject to U.S. tax in the year they are recognized and contributions to the RESP may be subject to additional U.S. tax and reporting requirements.</p></li> </ul> <p>Remember, it’s always advisable to seek professional tax advice when dealing with these matters to ensure accurate reporting and compliance with all U.S. tax laws.</p> <h2 class="wp-block-heading" id="h-benefits-of-the-canada-us-income-tax-treaty-for-americans-in-canada">Benefits of the Canada-US Income Tax Treaty for Americans in Canada</h2> <p>The Canada-US Tax Treaty, formally known as the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital, provides several benefits for American citizens residing in Canada.</p> <ol class="wp-block-list"> <li><p><strong>Elimination of Double Taxation:</strong> The primary goal of the treaty is to prevent double taxation, where an individual would have to pay taxes in both the US and Canada on the same income. This is achieved through the Foreign Tax Credit, which allows US citizens to offset taxes paid to Canada on their US tax return.</p></li> <li><p><strong>Tax Deferral for Retirement Savings:</strong> The treaty allows US citizens in Canada to defer tax on income contributed to Canadian Registered Retirement Savings Plans (RRSPs) until it is withdrawn, similar to an IRA in the US.</p></li> <li><p><strong>Estate Taxes:</strong> For Americans living in Canada, the treaty provides relief from double taxation in the event of death. The estate, inheritance, and gift taxes imposed by one country may be credited against the tax levied by the other country.</p></li> <li><p><strong>Reduced Withholding Taxes:</strong> The treaty reduces the rate of withholding tax on cross-border interest, dividends, and royalty payments.</p></li> <li><p><strong>Protections for Social Security Benefits:</strong> Under the treaty, US Social Security benefits and Canadian Social Security (<a href="https://cbfinpc.com/?s=oas">CPP and OAS</a>) benefits are only taxable in the recipient’s country of residence.</p></li> </ol> <p>Remember, the interpretation and application of the tax rules and treaties can be complex, and it’s always advisable to consult a tax professional to understand how these rules apply to your specific situation.</p> <figure class="wp-block-image"><img decoding="async" width="1080" height="1080" src="https://cbfinpc.com/wp-content/uploads/2023/12/image-2.png" alt="" class="wp-image-5285" srcset="https://cbfinpc.com/wp-content/uploads/2023/12/image-2.png 1080w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-150x150@2x.png 300w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-1024x1024.png 1024w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-150x150.png 150w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-400x400.png 400w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-92x92.png 92w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-600x600.png 600w, https://cbfinpc.com/wp-content/uploads/2023/12/image-2-100x100.png 100w" sizes="(max-width: 1080px) 100vw, 1080px" /></figure> <h2 class="wp-block-heading" id="h-deadline-for-u-s-tax-returns">Deadline for U.S. Tax Returns</h2> <p>The annual deadline for filing individual tax returns with the Internal Revenue Service (IRS) in the United States is typically April 15. However, when this date falls on a weekend or a holiday, the filing deadline often is extended to the next business day. For U.S. citizens living abroad, including those in Canada, an automatic two-month extension to June 15 is available. Nevertheless, any owed taxes are still due by April 15, and interest will accrue on any payment made after this date. It’s essential to stay informed about these deadlines to avoid any penalties or late fees.</p> <h2 class="wp-block-heading" id="h-deadline-for-canadian-tax-returns">Deadline for Canadian Tax Returns</h2> <p>In Canada, the deadline for individual tax returns is generally April 30 each year. However, if this date falls on a weekend, the Canada Revenue Agency (CRA) extends the general filing deadline to the next business day. It’s crucial to be aware of this date to avoid penalties for late filing. If you or your spouse or common-law partner are self-employed, the deadline to file your taxes is June 15. However, if you owe taxes, they are still due by April 30. As with U.S. tax deadlines, it is advisable to consult with a tax professional to ensure accuracy and compliance with all tax laws.</p> <p>In conclusion, navigating tax obligations as a U.S. citizen living in Canada can be complex and daunting due to the intricate nature of both the U.S. and Canadian tax systems. It’s crucial to keep in mind the requirement of reporting worldwide income to both the IRS and CRA. Moreover, understanding the unique aspects of each system, such as the tax treatment of Canadian mutual funds, TFSAs, and RESPs by the IRS, is critical. Deadlines for filing tax returns differ slightly in both countries, so it’s essential to stay informed to avoid penalties or late fees. Due to the complexity and potential for errors, it is highly recommended to seek guidance from a tax professional to ensure accurate reporting and full compliance with tax laws in both countries.</p> <h2 class="wp-block-heading" id="h-submitting-u-s-tax-filings-from-canada">Submitting U.S. Tax Filings from Canada</h2> <p>Submitting U.S. tax filings from Canada can be easily done through electronic filing, also known as e-filing. Here’s how to go about it:</p> <ol class="wp-block-list"> <li><p><strong>Prepare Your Tax Documents</strong>: Gather all necessary documents, including W-2s, 1099s, and any documents related to foreign income or taxes paid. For foreign income, you’ll need statements from Canadian banks or financial institutions, as well as proof of any Canadian taxes you paid.</p></li> <li><p><strong>Choose an IRS-Approved E-File Provider</strong>: Make sure the provider supports the forms you need to file, including Form 1040 and Form 1116 for claiming the Foreign Tax Credit.</p></li> <li><p><strong>Complete Your Tax Return</strong>: Input your income information, deductions, and credits into the provider’s software. Be sure to include any Canadian income and taxes paid in the foreign income sections.</p></li> <li><p><strong>Submit Your Tax Return</strong>: Once you’ve completed your tax return, you can submit it directly to the IRS through the e-file provider. You’ll receive a confirmation once it’s been accepted.</p></li> <li><p><strong>Pay Any Owed Taxes</strong>: If you owe taxes, you can pay them online through the IRS’s Direct Pay system or by setting up an installment agreement if you’re unable to pay in full.</p></li> <li><p><strong>Keep a Copy of Your Submission</strong>: Be sure to save a copy of your filed tax return and all associated documents for your records.</p></li> </ol> <p>Remember, international taxation can be complex, and mistakes can lead to penalties. Consider consulting with a tax professional experienced in U.S. expatriate taxes to ensure accurate and timely tax filing throughout.</p> <h2 class="wp-block-heading" id="h-mailing-u-s-tax-returns-that-cannot-be-e-filed-from-canada">Mailing U.S. Tax Returns That Cannot Be E-Filed from Canada</h2> <p>In some cases, taxpayers might not be able to e-file their U.S. tax returns. When this occurs, mailing in the tax returns becomes necessary. Here’s how to do it:</p> <ol class="wp-block-list"> <li><p><strong>Prepare Your Tax Return:</strong> Complete your tax return as you would for e-filing, ensuring that all necessary forms, schedules, and documentation are included. Sign and date your return.</p></li> <li><p><strong>Make Copies for Your Records:</strong> It’s essential to keep a copy of all documents you’re sending to the IRS for your personal records.</p></li> <li><p class="tdfocus-1702427729200"><strong>Address the Envelope:</strong> Depending on where you live, the IRS has different mailing addresses for receiving paper tax returns. For taxpayers in Canada who <span class="tdfocus-1702427759122" style="font-size: revert; color: initial;">are not enclosing a payment to the IRS</span>, the mailing address is Department of the Treasury, Internal Revenue Service, Austin, TX 73301-0215 USA.</p></li> <li><p>Always consult a tax professional to ensure you’re correctly preparing and mailing your tax return. This helps avoid any potential errors or delays in processing.</p></li> </ol> <figure class="wp-block-image"><img loading="lazy" decoding="async" width="1080" height="1080" src="https://cbfinpc.com/wp-content/uploads/2023/12/image-4.png" alt="" class="wp-image-5287" srcset="https://cbfinpc.com/wp-content/uploads/2023/12/image-4.png 1080w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-150x150@2x.png 300w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-1024x1024.png 1024w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-150x150.png 150w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-400x400.png 400w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-92x92.png 92w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-600x600.png 600w, https://cbfinpc.com/wp-content/uploads/2023/12/image-4-100x100.png 100w" sizes="auto, (max-width: 1080px) 100vw, 1080px" /></figure> <h2 class="wp-block-heading" id="h-making-a-payment-to-the-irs">Making a Payment to the IRS</h2> <p>If you owe taxes to the Internal Revenue Service (IRS), there are several methods available to make a payment, even from abroad. Here’s how you can do it:</p> <ol class="wp-block-list"> <li><p><strong>Direct Pay:</strong> The IRS Direct Pay service allows you to pay directly from your checking or savings account at no cost. You can use this service to pay your individual tax bill or estimated tax payment. After confirming your identity, input the payment details, including the amount and the date you want the payment to be made.</p></li> <li><p><strong>Electronic Federal Tax Payment System (EFTPS):</strong> EFTPS is a free service from the U.S. Department of the Treasury. To use EFTPS, you must first enroll in the system, which can take five to seven business days. Once enrolled, you can schedule payments from your checking or savings account. EFTPS also allows you to schedule payments up to 365 days in advance.</p></li> <li><p><strong>Debit or Credit Card Payments:</strong> The IRS uses third-party payment processors to process debit and credit card payments. Note that these processors charge a fee. Once you select a payment processor, you’ll be prompted for payment information and confirmation.</p></li> <li><p><strong>Pay by Check or Money Order:</strong> If you wish to mail a payment, you can send a check or money order payable to the U.S. Treasury. Ensure that your name, address, Social Security number, and phone number are written on your check. Include a Form 1040-V, which is a payment voucher, but don’t attach the check to the voucher.</p></li> <li><p><strong>Wire Transfer:</strong> If you’re abroad, you also have the option to pay by wire transfer. You can ask your bank or financial institution to make a same-day wire payment on your behalf.</p></li> </ol> <p>Please remember that it’s essential to make payments on time to avoid any penalties or additional interest. Consider consulting with a tax professional if you need advice on making a tax payment to the IRS.</p> <h2 class="wp-block-heading" id="h-making-a-payment-to-the-canada-revenue-agency-cra">Making a Payment to the Canada Revenue Agency (CRA)</h2> <p>If you owe taxes to the Canada Revenue Agency (CRA), there are multiple methods available to make a payment, even from abroad. Here are the steps you can follow:</p> <ol class="wp-block-list"> <li><p><strong>My Payment:</strong> The CRA’s My Payment service is an electronic payment service that lets individuals and businesses make payments directly to the CRA from their online banking account. Use this service to pay your individual, business, or GST/HST taxes.</p></li> <li><p><strong>Financial Institutions:</strong> You can pay your taxes through your financial institution’s telephone or Internet banking services. Most Canadian financial institutions offer this service.</p></li> <li><p><strong>Debit Card:</strong> You can pay your taxes using Visa Debit, Debit MasterCard, or Interac Online. Choose the “Pay by Debit Card” option when you check out.</p></li> <li><p><strong>Pre-Authorized Debit:</strong> Pre-authorized Debit is a secure, online self-service payment option for individuals and businesses. This option lets you set the payment amount you authorize the CRA to withdraw from your Canadian bank account to pay your taxes on a specified date<span style="color: initial;">.</span></p></li> </ol> <p>Remember, it’s crucial to make payments on time to avoid any penalties or additional interest. Consider consulting with a tax professional if you need advice on making a tax payment to the CRA.</p> <p>This blog post provides comprehensive guidance on the process of filing U.S. tax returns from Canada, handling situations where e-filing may not be possible, and the options available for making payments to both the Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA). It underscores the importance of meticulous preparation, retaining copies of all documents, and consulting with a tax professional to avoid errors and penalties. The post emphasizes the convenience of various online payment methods, including Direct Pay and the Electronic Federal Tax Payment System for the IRS, and My Payment service for the CRA, while also accommodating traditional methods such as checks or money orders. The importance of making payments on time to eschew penalties or additional interest is reiterated throughout.</p> <h2 class="wp-block-heading" id="h-need-help-from-a-cross-border-tax-accountant-in-toronto-or-oakville-ontario"><strong>Need Help from a Cross-Border Tax Accountant in Toronto or Oakville, Ontario?</strong></h2> <p><em>Contact </em><em>Contact </em><a target="_blank" rel="noreferrer noopener" href="https://www.cbfinpc.com/"><em>Cross-Border Financial Professional Corporation</em></a><em> – When Perspectives Matter!</em></p> <p><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on </em><a target="_blank" rel="noreferrer noopener" href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true"><em>Linkedin</em></a><em> and </em><a target="_blank" rel="noreferrer noopener" href="https://twitter.com/CrossBorder_Fin"><em>Twitter</em></a><em>, or hang out on </em><a target="_blank" rel="noreferrer noopener" href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour"><em>Facebook.</em></a></p> <p>The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</p> <h2 class="wp-block-heading" id="h-get-started-working-with-us-by-clicking-nbsp-here-submit-the-form-to-receive-a-link-to-schedule-a-meeting">Get started working with us by clicking <a target="_blank" rel="noreferrer noopener" href="https://cbfinpc.com/intake-tax-docs-consultation/">here</a>. Submit the form to receive a link to schedule a meeting.</h2> <p></p> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&linkname=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&linkname=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&linkname=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&linkname=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&linkname=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fhow-to-file-tax-returns-from-canada-as-an-american%2F&title=How%20to%20File%20a%20U.S.%20Tax%20Return%20from%20Canada%20as%20an%20American%3F" data-a2a-url="https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/" data-a2a-title="How to File a U.S. Tax Return from Canada as an American?"></a></p><p>The post <a href="https://cbfinpc.com/how-to-file-tax-returns-from-canada-as-an-american/">How to File a U.S. Tax Return from Canada as an American?</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> </item> <item> <title>Tax Savvy Americans: Important Things to Consider Before Moving from the U.S. to Canada</title> <link>https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/</link> <comments>https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Sun, 03 Dec 2023 14:10:36 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[US and Canadian Individual]]></category> <category><![CDATA[US Individual Tax]]></category> <category><![CDATA[US Pensions for Canadians]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=5219</guid> <description><![CDATA[<p>Moving from the U.S. to Canada? Learn 10 important tax factors to consider. John and Jane had been dreaming of a life in Canada for years. They loved the idea of living in Canada – with its laid-back lifestyle, beautiful scenery, and ample opportunities for business. So, when they got the chance to move to […]</p> <p>The post <a href="https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/">Tax Savvy Americans: Important Things to Consider Before Moving from the U.S. to Canada</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[ <p>Moving from the U.S. to Canada? Learn 10 important tax factors to consider.</p> <p>John and Jane had been dreaming of a life in Canada for years. They loved the idea of living in Canada – with its laid-back lifestyle, beautiful scenery, and ample opportunities for business. So, when they got the chance to move to Toronto, there was no hesitation.</p> <p>But what John and Jane didn’t anticipate was all the tax implications that came with moving across borders. When it comes to cross-border taxes, there are some important things everyone should consider before they make their decision.</p> <p>The first thing on their list was determining whether or not any large investments would be subject to capital gains taxes – something that could have an enormous impact on their finances if left unchecked. Then they had to think about how investing in U.S.-based assets while living in Canada might affect them; this included foreign asset disclosure requirements between both nations.</p> <p>All in all though by taking their time and doing proper due diligence prior to relocating northward, John & Jane managed not only to keep themselves out of hot water with their taxes legally but also saved lots of money come Tax Day…something we’d all like a little bit more of, wouldn’t we?</p> <p>Here are some insights into what John and Jane considered with their cross-border tax advisor. </p> <h2 class="wp-block-heading" id="h-tax-implications-of-holding-a-principal-residence-after-moving-from-the-u-s-to-canada"><strong class="tdfocus-1701352457977">Tax Implications of Holding a Principal Residence After Moving </strong><strong>from the U.S. </strong><strong class="tdfocus-1701352457977">to Canada</strong></h2> <p>John and Jane were advised that if they were considering moving to Canada while still owning a principal residence in the U.S., it was crucial for them to understand the potential tax drawbacks that may arise from this situation.</p> <p>Under U.S. tax rules, homeowners may be eligible to exclude a certain amount of gain from the sale of their principal residence. Single taxpayers can exclude up to $250,000, while married taxpayers can exclude up to $500,000. However, to qualify for this exclusion, certain criteria must be met.</p> <p>Firstly, the property must have been owned and occupied as the taxpayer’s principal residence for at least two out of the last five years prior to the sale. Additionally, the exclusion only applies to one sale or exchange every two years. Any gain linked to periods of nonqualified use of the property is not eligible for exclusion.</p> <p>So, what does this mean for John and Jane moving to Canada while retaining their U.S. property? While they may fulfill the ownership test by keeping legal title, the occupancy/use test could be compromised. As a result, the longer they own the U.S. property without occupying it, the more their eligible exclusion from capital gains may be reduced. This can potentially lead to a significant tax bill for married couples living in Canada, which can be avoided through proper planning.</p> <p>In Canada, the rules regarding <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/">principal residences</a> also come into play. If a property is deemed a ‘principal residence’, any capital gain from its sale is exempt from taxes under the ‘<a target="_blank" rel="noopener noreferrer" href="https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate.html">Principal Residence Exemption</a>‘ regulation. To qualify as a principal residence in Canada, the taxpayer must reside in the property during the year and designate it as their principal residence. It’s worth noting that the property doesn’t have to be the taxpayer’s main home; as long as they or their family ordinarily occupy it during the tax year, it may still qualify. However, justifying a principal residence exemption for a U.S. property that is not ordinarily occupied can be challenging under Canadian rules. </p> <p>Fortunately, if subject to taxes on any gains on the property, it may be possible to claim <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/how-us-foreign-tax-credits-may-work-to-keep-money-in-the-pocket-of-a-canadian-filing-a-us-tax-return/">foreign tax credits</a> on a Canadian return to offset balances owed to the CRA.</p> <p>With these tax implications in mind, it is crucial to make informed decisions when it comes to holding a principal residence in the U.S. after moving to Canada. Professional guidance and strategic planning can help minimize tax burdens and ensure compliance with both U.S. and Canadian tax regulations.<strong> </strong></p> <h2 class="wp-block-heading" id="h-investing-in-the-u-s-after-moving-to-canada"><strong class="tdfocus-1701352504772">Investing in the U.S. after Moving</strong> <strong>to</strong> <strong>Canada</strong></h2> <p>Discovering that Canadian residents are subject to taxes on their worldwide income was an eye-opening realization for John and Jane. It became evident that the location of their investments and the currency they held were inconsequential. The only thing that matters is their residency in Canada, as the Canada Revenue Agency (CRA) is entitled to their fair share of income tax on any earnings, no matter where they originate.</p> <p>To ensure compliance with this requirement, there is a specific form known as Form T1135 – Foreign Income Verification Statement. This form serves the purpose of reporting foreign assets and income to the CRA. It must be completed if the cost of certain foreign assets exceeds $100,000 Canadian (based on the exchange rates at the time of purchase) at any point during the year. Most investment assets, such as U.S. stocks, fall under the category of specified foreign property.</p> <p>The IRS, the U.S. taxation authority, also mandates tax withholding on certain types of income based on the country of residence of a foreign individual. To regulate this, Canada and the U.S. established a <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/residency-and-the-us-canada-tax-treaty-tie-breaker-rules/">tax treaty</a> named the Convention Between Canada and the United States of America back in 1980. This treaty has undergone various amendments since its inception and establishes treaty withholding rates depending on the income type and the taxpayer’s residence.</p> <p>A potential complication that can arise is that most U.S. brokers are not authorized to serve individuals residing in Canada. As a result, these brokers often inform individuals that their funds will be liquidated within a short timeframe, thereby creating an unforeseen and significant tax impact. However, this issue can be mitigated through careful tax planning and by consulting with a cross-border tax advisor who can provide valuable guidance.</p> <p>In addition, when an individual establishes Canadian residence, Canadian tax rules consider them to have sold and repurchased each property they own at its fair market value at the time of arrival. This means that any gains or losses accrued before becoming a resident are not relevant for Canadian tax purposes when the property is sold later on. John and Jane knew they would calculate their capital gain or loss based on the fair market value at the date of immigration. These rules ensure that the taxpayer is not taxed in the future on gains that were accrued while not a resident in Canada, with some exceptions.<strong> </strong></p> <h2 class="wp-block-heading" id="h-foreign-asset-disclosure-requirements-in-canada-and-the-u-s"><strong>Foreign Asset Disclosure Requirements in Canada and the U.S.</strong></h2> <p>John and Jane took the time to understand the foreign asset reporting rules in Canada and the U.S. They learned that Canadian residents, including corporations, must report any specified foreign properties that cost over $100,000 Canadian at any point during the tax year. This can be done through the T1135 – Foreign Income Verification Statement form, with the exception of immigrants who are exempt in their first year of residence.</p> <p>They also discovered that reporting foreign bank accounts in the U.S. can be complex. It involves understanding the requirements of both the <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/reporting-canadian-and-other-foreign-accounts-in-the-u-s-a-comparison-of-u-s-fbar-fatca-reporting-requirements/">Financial Account Tax Compliance Act (FATCA)</a> and the <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/reporting-canadian-and-other-foreign-accounts-in-the-u-s-a-comparison-of-u-s-fbar-fatca-reporting-requirements/">Financial Crimes Enforcement Network (FinCEN)</a>.</p> <p>US individuals must also consider the FinCEN requirements and file a FinCEN Form 114, <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/fbars/">Report of Foreign Bank and Financial Accounts (FBAR)</a>, to report foreign financial accounts.</p> <p>It’s essential to note that filing Form 8938 does not exempt a U.S. filer from the FBAR reporting requirements.</p> <p>Armed with this knowledge, John and Jane took steps to streamline their foreign asset reporting process and consolidate their assets.</p> <p></p> <h2 class="wp-block-heading" id="h-pension-considerations-for-moving-to-canada-from-the-u-s"><strong>Pension Considerations for Moving to Canada From the U.S.</strong></h2> <p>Concerns about the tax impact of their U.S. pensions have arisen for John and Jane, who have worked for many years and have accumulated significant funds. However, there are options to address these concerns.</p> <p>For <a href="https://cbfinpc.com/taxation-of-us-iras-for-canadian-residents/" target="_blank" rel="noopener noreferrer">Traditional IRAs</a>, it’s a relief to know that they can maintain their tax-deferred status in Canada under the Canadian Income Tax Act and the Canada-US tax treaty. They may even consider transferring funds to Canada for the sake of consolidating their assets and simplifying their estate plan. </p> <p>On the other hand, <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/taxation-of-us-iras-for-canadian-residents/">Roth IRAs</a> are similar to Canadian <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/canadian-tax-free-savings-accounts/">Tax-Free Savings Accounts</a>, but they don’t enjoy the same tax deferral benefits in Canada. Income earned in a Roth IRA is generally taxable in the year it’s earned. However, John and Jane discovered that it’s possible to file an election for tax deferral with the CRA for a U.S. Roth IRA, but they need to be cautious about making Canadian contributions. </p> <p>When it comes to <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/taxation-of-us-iras-for-canadian-residents/">401(k) plans</a>, they are similar to Canadian defined contribution plans. Canadian residents can still benefit from tax deferrals on earnings in a 401(k) under the Canada-U.S. Income Tax Treaty. </p> <p>If John and Jane decide to withdraw funds from their U.S. retirement plan, they need to be aware that the amount withdrawn is taxable in Canada. However, under certain conditions, it may be possible to transfer the funds to a Canadian RRSP. However careful planning and assessment of tax considerations are necessary to ensure long-term benefits. Factors to consider include U.S. tax implications and the ability to claim foreign tax credits in Canada for taxes paid in the U.S. </p> <p></p> <h2 class="wp-block-heading" id="h-avoid-pfics-when-investing-abroad"><strong>Avoid PFICs when Investing Abroad</strong></h2> <p>John and Jane has never heard of a PFIC. It stands for Passive Foreign Investment Company. This investment vehicle, which includes various funds and trusts, is registered outside of the U.S. But here’s the catch: PFICs are subject to a complex and strict tax system, far more complicated than U.S. mutual funds or exchange traded funds.</p> <p>So, how are PFICs taxed? Let’s break it down.</p> <p>Excess distribution, Mark-to-Market (MTM), and Qualified Electing Fund (QEF) are the three methods of PFIC taxation.</p> <p>The default option is excess distribution as a §1291 Fund. Under this method, you will be taxed on excess distributions and any gain when you sell or dispose of your stockholdings.</p> <p>Alternatively, you can choose the Mark-to-Market (MTM) election. This means that yearly increases in your PFIC’s value will be taxed as ordinary gains. At the end of the year, your marketable stock will be treated as if you sold and repurchased it at its fair market value on the last business day. Remember, for this election, you need to make the choice in the first year, or your PFIC will default to being taxed under excess distribution.</p> <p>Lastly, there is the Qualified Electing Fund (QEF) election. With this option, your PFIC will be taxed on its pro-rata share of undistributed earnings for both ordinary income and long-term capital gain. However, the associated documentation requirements make this method challenging to implement.</p> <p>Here’s the bottom line: investing in foreign mutual funds may not always be worth the cost. The complex tax reporting requirements and higher tax rates associated with PFICs can erode your investment returns over time.</p> <p>Furthermore, reporting PFICs on IRS Form 8621 is both time-consuming and costly. Each PFIC investment requires a separate form, with an estimated average of 22 hours to properly fill out. For American expat investors, building a portfolio of non-U.S. mutual funds could be a major hassle to avoid.</p> <p></p> <h2 class="wp-block-heading" id="h-stock-compensation-benefits-from-an-employer-in-the-u-s"><strong>Stock Compensation Benefits from an Employer in the U.S.</strong></h2> <p>John and Jane’s tax advisor informed them that Canada taxes the benefit gained from stock option exercise as employment income, either at the time of exercise or when the shares are sold. This means that for non-residents who exercise foreign stock options in Canada, there has been a historical risk of Canadian taxation and uncertainty around treaty application. To minimize tax liabilities, it may be advisable for individuals to exercise the options before becoming a resident or to hold onto them throughout their temporary stay in Canada. The decision to exercise the stock options will be influenced by the individual’s marginal tax rate in their home country.</p> <p></p> <h2 class="wp-block-heading" id="h-working-remotely-in-canada-for-u-s-company"><strong class="tdfocus-1701351855150">Working Remotely in Canada for U</strong><strong>.</strong><strong class="tdfocus-1701351855150">S. Company</strong></h2> <p>As a resident of Canada or someone deemed to be a resident of Canada, it is important to be aware that you must report all of your income from worldwide sources for Canadian income tax purposes.</p> <p>If you are a Canadian resident, you are subject to taxation on your income from employment, business, property ownership, as well as certain other forms of income.</p> <p>This means that if you work for a U.S. employer while residing in Canada, the income you earn will be taxable by Canada. Whether the income is considered Canadian or U.S. sourced will depend on where the work is performed. Sourcing rules determine which country is entitled to the income and which country can claim a <a href="https://cbfinpc.com/u-s-foreign-tax-credits-for-canadians/">foreign tax credit</a>. Working for a U.S. employer while living in Canada can potentially create complications regarding payroll and taxes in general.</p> <h2 class="wp-block-heading" id="h-no-option-for-joint-tax-filing-in-canada"><strong>No Option for Joint Tax Filing in Canada</strong></h2> <p>Many newcomers to Canada are surprised to learn that joint tax filing is not an option for Canadian taxpayers. Unlike the United States, where married couples can file jointly and benefit from potential tax advantages, each taxpayer in Canada must file separate tax returns. This means that any advantage that joint filings may have is eliminated.</p> <h2 class="wp-block-heading" id="h-the-u-s-canada-tax-treaty"><strong>The U.S. – Canada Tax Treaty</strong></h2> <p>Under the U.S.–Canada Tax Treaty, Americans living in Canada can file their U.S. taxes and avoid double taxation through tax credits. It is recommended to file Canadian taxes first and then claim U.S. tax credits using Form 1116 alongside Form 1040.</p> <p>Alternatively, you can utilize the Foreign Earned Income Exclusion by completing <a href="https://www.irs.gov/pub/irs-pdf/f2555.pdf">Form 2555</a>. Furthermore, students and trainees can prevent double taxation by using <a href="https://www.irs.gov/pub/irs-pdf/f8833.pdf">Form 8833 </a>if applicable. If you have U.S. Roth IRAs, you can take advantage of a tax treaty provision to ensure your withdrawals remain tax-free in Canada.</p> <h2 class="wp-block-heading" id="h-important-dates-for-filing-taxes-in-the-u-s-and-canada"><strong>Important Dates for Filing Taxes in the U.S. and Canada</strong></h2> <p>The deadline for filing Canadian taxes is April 30, or June 15 for self-employed individuals. There are no extensions allowed. However, American citizens living in Canada have an automatic extension until June 15 to file their U.S. taxes. If needed, they can request a further extension until October 15.</p> <div style="height:0px" aria-hidden="true" class="wp-block-spacer"></div> <p>Additionally, some Americans in Canada may still be required to file U.S. State taxes if they have ties to the state where they last lived, such as financial accounts, property, or dependents. The rules for each state may vary.</p> <p>The blog post provides a comprehensive guide to managing financial responsibilities for Canadians who have moved or are considering moving from the U.S., focusing on crucial aspects such as principal residence, investments, foreign asset disclosure, and pension considerations. It emphasizes the importance of understanding the tax laws of both countries and making informed decisions to avoid unexpected tax liabilities. The use of professional guidance is highlighted, especially in navigating complex issues such as reporting foreign assets, managing investments, and planning for pension funds. Whether it’s maintaining a tax-deferred status for traditional IRAs or assessing tax implications for withdrawing funds from U.S. retirement plans, the post underscores the necessity of strategic planning and compliance with tax regulations for financial stability.</p> <p></p> <h2 class="wp-block-heading" id="h-need-help-from-a-cross-border-tax-accountant-in-toronto-or-oakville-ontario"><strong>Need Help from a Cross-Border Tax Accountant in Toronto or Oakville, Ontario?</strong></h2> <p><em>Contact </em><a target="_blank" rel="noopener noreferrer" href="https://www.cbfinpc.com/"><em>Cross-Border Financial Professional Corporation</em></a><em> – When Perspectives Matter!</em></p> <p class="has-text-align-start"><p style="text-align: start" class=" "><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on </em><a target="_blank" rel="noopener noreferrer" href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true"><em>Linkedin</em></a><em> and </em><a target="_blank" rel="noopener noreferrer" href="https://twitter.com/CrossBorder_Fin"><em>Twitter</em></a><em>, or hang out on </em><a target="_blank" rel="noopener noreferrer" href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour"><em>Facebook.</em></a></p></p> <p class="has-text-align-start"><p style="text-align: start" class=" ">The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</p></p> <p class="has-text-align-start"><p style="text-align: start" class=" ">Get started working with us by clicking <a target="_blank" rel="noopener noreferrer" href="https://cbfinpc.com/intake-tax-docs-consultation/">here</a>. Submit the form to receive a link to schedule a meeting.</p></p> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&linkname=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&linkname=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&linkname=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&linkname=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&linkname=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fkey-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial%2F&title=Tax%20Savvy%20Americans%3A%20Important%20Things%20to%20Consider%20Before%20Moving%20from%20the%20U.S.%20to%20Canada" data-a2a-url="https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/" data-a2a-title="Tax Savvy Americans: Important Things to Consider Before Moving from the U.S. to Canada"></a></p><p>The post <a href="https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/">Tax Savvy Americans: Important Things to Consider Before Moving from the U.S. to Canada</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> <wfw:commentRss>https://cbfinpc.com/key-things-tax-savvy-americans-should-consider-before-moving-to-canada-cross-border-financial/feed/</wfw:commentRss> <slash:comments>0</slash:comments> </item> <item> <title>Key COVID-19 Benefits for US Citizens and Residents</title> <link>https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/</link> <comments>https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Tue, 07 Apr 2020 15:10:17 +0000</pubDate> <category><![CDATA[US Individual Tax]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=4058</guid> <description><![CDATA[<p>For many individuals including US expats, the impacts of COVID-19 have been significant. Fortunately, the IRS is providing some key tax-related benefits individual taxpayers should be aware of. Coronavirus Rebates Perhaps the most wide spread benefit is the economic stimulus package payment to individuals. This payment is part of the 2020 Coronavirus Aid , Relief […]</p> <p>The post <a href="https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/">Key COVID-19 Benefits for US Citizens and Residents</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[<p>For many individuals including US expats, the impacts of COVID-19 have been significant. Fortunately, the IRS is providing some key tax-related benefits individual taxpayers should be aware of.</p> <p><span id="more-4058"></span></p> <h2><strong>Coronavirus Rebates</strong></h2> <p>Perhaps the most wide spread benefit is the economic stimulus package payment to individuals. This payment is part of the 2020 Coronavirus Aid , Relief and Economic Security (CARES) Act. Under the CARES Act, eligible individuals will receive a tax credit of $1,200 ($2,400 for married individuals who file a joint return) plus an additional $500 for each qualifying child. This credit begins to phase out for individual taxpayers with an adjusted gross income (AGI) over $75,000, above $150,000 for joint filers and above $112,5000 for heads of households.</p> <p>It is important to keep in mind that the stimulus rebates issued will not be taxable income. Instead, they are being treated as an advance of refunds of a 2020 tax credit. Once a 2020 US tax return is prepared, taxpayers will reduce the amount of the credit available on their 2020 tax return by the amount of the advance refund received.</p> <p>While US expats qualify to receive this payment, non-residents, estates and trusts are excluded. In addition, individuals claimed as a dependent of another are not eligible for the payment.</p> <h2><strong>Retirement Plan Distributions</strong></h2> <p>In addition, US taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the 10% additional tax on early distributions. Eligible distributions are permitted until December 31, 2020. These distributions may be repaid over three years, with any income inclusions and tax spread over three years.</p> <p>In addition, loans of up to $100,000 may be taken from qualified plans, with repayment delayed for one year and required minimum distributions are suspended for 2020.</p> <h2><strong>Charitable Deductions</strong></h2> <p>For the 2020 tax year, an above-the-line charitable deduction is available (not to exceed $300).</p> <h2><strong>Health Plans</strong></h2> <p>High-deductible health plans are now allowed to cover telehealth and other remote services with charging a deductible. Some over-the-counter items may now be claimed.</p> <h2>Need Help from a Cross-Border Tax Accountant in Oakville, Ontario?</h2> <p><em>Contact </em><a href="https://cbfinpc.com"><em>Cross-Border Financial Professional Corporation</em></a><em> – When Perspectives Matter!</em></p> <p><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of </em><a href="https://cbfinpc.com"><em>Cross-Border Financial Professional Corporation</em></a><em>. Follow us on </em><a href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true">Linkedin</a><em> and </em><a href="https://twitter.com/CrossBorder_Fin">Twitter</a><em>, or hang out on </em><a href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour">Facebook.</a></p> <p>The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</p> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&linkname=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&linkname=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&linkname=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&linkname=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&linkname=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fkey-covid-19-benefits-for-us-citizens-and-residents%2F&title=Key%20COVID-19%20Benefits%20for%20US%20Citizens%20and%20Residents" data-a2a-url="https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/" data-a2a-title="Key COVID-19 Benefits for US Citizens and Residents"></a></p><p>The post <a href="https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/">Key COVID-19 Benefits for US Citizens and Residents</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> <wfw:commentRss>https://cbfinpc.com/key-covid-19-benefits-for-us-citizens-and-residents/feed/</wfw:commentRss> <slash:comments>0</slash:comments> </item> <item> <title>Should the Sale of a Canadian Principal Residence Be Avoided When Subject to U.S. Taxation?</title> <link>https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/</link> <comments>https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Fri, 15 Nov 2019 13:00:20 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[US and Canadian Individual]]></category> <category><![CDATA[US Individual Tax]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=3884</guid> <description><![CDATA[<p>Your principal residence is likely one of, if not your largest asset. As a dual U.S. and Canadian tax filer, planning for the tax implications is key. Canadian vs U.S. Taxation Under Canadian tax rules, it’s often possible to exclude unlimited gains on the sale of a principal residence. U.S. tax rules however differ. Under […]</p> <p>The post <a href="https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/">Should the Sale of a Canadian Principal Residence Be Avoided When Subject to U.S. Taxation?</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[<p>Your principal residence is likely one of, if not your largest asset. As a dual U.S. and Canadian tax filer, planning for the tax implications is key.<span id="more-3884"></span></p> <h2><strong><b>Canadian vs U.S. Taxation</b></strong></h2> <p>Under Canadian tax rules, it’s often possible to exclude unlimited gains on the sale of a principal residence.</p> <p>U.S. tax rules however differ. Under those rules a single filer can exclude up to $250,000 in capital gains on the sale of a principal residence from tax. This jumps to $500,000 for married filers who file a joint return. U.S. tax rules generally require you to have lived in the property for two of the last five years to claim the entire amount.</p> <h2><strong><b>Americans in Canada</b></strong></h2> <p>For U.S. filers resident in Canada, these rules also apply. Fortunately, because this income is foreign income, it would be eligible for reduction on a U.S. income tax return using <a href="https://cbfinpc.com/how-us-foreign-tax-credits-may-work-to-keep-money-in-the-pocket-of-a-canadian-filing-a-us-tax-return/"><u>foreign tax credits</u></a>. However, as these gains are not considered to be derived from earned income, the <a href="https://cbfinpc.com/foreign-earned-income-exclusion/"><u>foreign earned income exclusion</u></a> would not apply.</p> <h2><strong><b>Canadians Moving to the U.S.</b></strong></h2> <p>For those who chose to hang on to their home after moving to the U.S. there is some relief. Under Article XIII (6) of the Canada-U.S. treaty, a former Canadian resident who has moved to the U.S. can increase the U.S. cost basis in their principal residence to its fair market value on the date the individual ceases to be a resident of Canada.</p> <p>Despite this, given differences in the tax treatment of the sale of a principal residence in the U.S. and Canada, considering the tax implications is key. As a Canadian filer it may make sense to avoid the sale of a Canadian principal residence when subject to U.S. taxation.</p> <p><em>Got U.S. tax and Canadian tax compliance issues? Contact </em><a href="https://cbfinpc.com/"><em>Cross-Border Financial Professional Corporation</em></a><em> – When Perspectives Matter!</em></p> <p><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of </em><a href="https://cbfinpc.com/">Cross-Border Financial Professional Corporation</a><em>. Follow us on </em><a href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true">Linkedin</a><em> and </em><a href="https://twitter.com/CrossBorder_Fin">Twitter</a><em>, or hang out on </em><a href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour">Facebook.</a></p> <p><em>The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.</em></p> <p><a class="a2a_button_linkedin" href="https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&linkname=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" title="LinkedIn" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_twitter" href="https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&linkname=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" title="Twitter" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_facebook" href="https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&linkname=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" title="Facebook" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_email" href="https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&linkname=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" title="Email" rel="nofollow noopener" target="_blank"></a><a class="a2a_button_sms" href="https://www.addtoany.com/add_to/sms?linkurl=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&linkname=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" title="Message" rel="nofollow noopener" target="_blank"></a><a class="a2a_dd addtoany_share_save addtoany_share" href="https://www.addtoany.com/share#url=https%3A%2F%2Fcbfinpc.com%2Fsale-of-a-principal-residence-u-s-vs-canada%2F&title=Should%20the%20Sale%20of%20a%20Canadian%20Principal%20Residence%20Be%20Avoided%20When%20Subject%20to%20U.S.%20Taxation%3F" data-a2a-url="https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/" data-a2a-title="Should the Sale of a Canadian Principal Residence Be Avoided When Subject to U.S. Taxation?"></a></p><p>The post <a href="https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/">Should the Sale of a Canadian Principal Residence Be Avoided When Subject to U.S. Taxation?</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></content:encoded> <wfw:commentRss>https://cbfinpc.com/sale-of-a-principal-residence-u-s-vs-canada/feed/</wfw:commentRss> <slash:comments>0</slash:comments> </item> <item> <title>Do I need to File a US Tax Return?</title> <link>https://cbfinpc.com/do-i-need-to-file-a-us-tax-return/</link> <comments>https://cbfinpc.com/do-i-need-to-file-a-us-tax-return/#respond</comments> <dc:creator><![CDATA[Karlene Mulraine]]></dc:creator> <pubDate>Thu, 13 Jun 2019 11:00:22 +0000</pubDate> <category><![CDATA[Canadian Individual Tax]]></category> <category><![CDATA[US Individual Tax]]></category> <category><![CDATA[US Individual Taxes for Canadians]]></category> <guid isPermaLink="false">https://cbfinpc.com/?p=3708</guid> <description><![CDATA[<p>Do I need to File a US Tax Return? If you are a US Citizen, Resident Alien (Green Card holder, or deemed US resident), or a non-resident with certain US source income, the answer may be, “Yes.” US Citizen or Resident Alien? Figuring out whether you fall into one of the above categories is often […]</p> <p>The post <a href="https://cbfinpc.com/do-i-need-to-file-a-us-tax-return/">Do I need to File a US Tax Return?</a> appeared first on <a href="https://cbfinpc.com">US & Canadian Cross-Border Tax Service - Cross-Border Financial Professional Corporation</a>.</p> ]]></description> <content:encoded><![CDATA[<h2><strong>Do I need to File a US Tax Return?</strong></h2> <p>If you are a US Citizen, Resident Alien (Green Card holder, or deemed US resident), or a non-resident with certain US source income, the answer may be, “Yes.”</p> <h2><strong><em>US Citizen or Resident Alien?</em></strong></h2> <p>Figuring out whether you fall into one of the above categories is often misunderstood. For instance, if you are the holder of an expired Green Card, you will still be subject to worldwide income taxation in the US until the proper steps are taken to surrender that Green Card. Also, individuals born outside the US to a US parent, may be considered to be US person subject to taxation on their worldwide income.</p> <h2><strong>Deemed Residents</strong></h2> <p>You may also be an accidental resident, or deemed to be a US resident by spending a significant amount of time in the US. This is based on what is referred to as a “substantial presence test.” For tax purposes, individuals are considered US residents if they meet the substantial presence test. This test is met in a calendar year by being physically present in the US for at least:</p> <ul> <li>31 days during the current calendar year; and</li> <li>183 days during the current year and the 2 preceding years – computed counting all the days of physical presence in the current year, but only a third of the days of presence in the first preceding year, and one sixth of days in the second preceding year.</li> </ul> <h2><strong><em>Living Outside the US</em></strong></h2> <p>Will a move to Canada, or another country from the US remove the requirement for a US citizen, or resident alien to file a US tax return? Likely not. The requirement to file a US return for a US citizen, or resident alien is generally the same irrespective of country of residence and income is generally reported on a Form 1040. US non-residents are taxed only on their US source income and file a Form 1040 NR. Fortunately, for both US residents and non-residents, there are a number of elections, deductions and credits that may be claimed to reduce income tax liability to nil in many instances.</p> <h2><strong><em>Filing Thresholds</em></strong></h2> <p>For the 2018 tax year, a tax return is generally required to be filed if your gross income from worldwide sources is at least the amount shown below for the various filing statuses.</p> <h2><strong><em>Filing Status</em></strong></h2> <ul> <li>Single – $12,000 <ul> <li>65 or older – $13,600</li> </ul> </li> <li>Head of household – $18,000 <ul> <li>65 or older – $19,600</li> </ul> </li> <li>Qualifying widow(er) – $24,000 <ul> <li>65 or older – $25,300</li> </ul> </li> <li>Married filing jointly – $24,000 <ul> <li>Not living with spouse at end of year – $0</li> <li>One spouse 65 or older – $25,300</li> <li class="tdfocus-1689471510468">Both spouses 65 or older – $26,600</li> <li>Married filing separately – $12,000</li> </ul> </li> </ul> <p>Self-employed individuals generally file when net earnings from self-employment are $400 or more.</p> <h2 class="tdfocus-1689471497546">Need Help from a Cross-Border Tax Accountant in Toronto or Oakville, Ontario?</h2> <p><em>Got US tax and Canadian tax compliance issues? Contact <a href="http://www.cbfinpc.com/">Cross-Border Financial Professional Corporation</a> – When Perspectives Matter! </em></p> <p><em>Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on <a href="https://www.linkedin.com/company/cross-border-financial-professional-corporation/?viewAsMember=true">Linkedin</a> and <a href="https://twitter.com/CrossBorder_Fin">Twitter</a>, or hang out on <a href="https://www.facebook.com/crossborderfinancial/?modal=admin_todo_tour">Facebook.</a></em></p> <p>The views expressed in this article are those of the author and should not be relied on to make decisions. 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