Cross Border Tax Accountant Mississauga Toronto
We provide US cross-border tax services for individuals and businesses operating in both Canada and the United States. Our clients are located throughout Canada and the US, including major Canadian cities such as Toronto, Vancouver, Calgary, and Montreal. Our most popular services include:
● Preparation of US and Canadian Personal Tax Returns: Our cross-border tax accountants assist individuals in accurately filing their tax returns in both countries.
● Cross-Border Tax Planning: Our team offers strategic advice to help clients navigate the complexities of cross-border taxation.
● Preparation of Business Tax Returns for US Partnerships and Corporations: We specialize in preparing tax returns for US real estate partnerships and corporations engaged in business activities in the United States. Our services ensure compliance with all tax regulations while optimizing your tax position. Read our brochure on the best cross-border tax structure for Canadians doing business in the US.
Allan Madan and MadanCPA are recognized specialists in US-Canada tax matters. Allan has authored several insightful articles on topics such as the tax implications for Canadians moving to the US, investing in US real estate, and best practices for Canadian companies expanding into the US.
Below, you’ll find a detailed list of the US tax services we offer.
Listing of Services by Cross Border Tax Accountant Mississauga Toronto, Canada:
Cross Border Tax - We prepare US and Canadian personal tax returns for individuals and businesses. This includes 1040 Tax Returns for US residents, 1040-NR Tax Returns for non-resident aliens of the US, T1 personal tax returns for Canadian residents and T1 non-resident tax returns for non-residents of Canada.
US 1040 Non-Resident Income Tax Return Filing and Preparation - Our cross-border tax accountants in Mississauga and Toronto file US 1040 Non-Resident Tax Returns with the IRS for Canadians who earn US employment (W2), business (Schedule C), rental (Schedule E) and capital gains income (Schedule D). We also assist Canadian sellers of US real estate with completing forms 8288-A and 8288-B.
US 1040 Income Tax Returns for US Tax Residents - We prepare US 1040 Income Tax Returns for US citizens residing in Canada and for Canadians who permanently live and work in the US. We also complete foreign tax credit forms T2209 and 1116 to help prevent double taxation.
Applying for US Individual Identification Number (ITIN) Form W7 - We apply for US Individual Taxpayer Identification Numbers (ITINs) on behalf of Canadian residents with a US tax filing obligation. Common situations include Canadian owners of US rental properties and Canadians selling US real estate.
US EIN Application Form SS4 - We prepare and file Form SS-4, the Application for an Employer Identification Number (EIN), for US and Canadian businesses. Canadians engaging in business in the US or owning a US LLC, US Partnership, or US C-Corporation are required to obtain a US EIN from the IRS.
US 1065 Partnership Return Preparation and Filing with IRS - Our cross-border accountants prepare US 1065 Partnership Returns and K1 slips for Canadian investors in US real estate and US businesses. We ensure the Returns are prepared accurately and filed on time.
US 1120-F Treaty-Based Corporate Tax Returns & Form 8833 Preparation and Filing - We prepare US 1120-F corporate tax returns for Canadian corporations conducting business in the US without a permanent establishment. We help them avoid US income tax on US sales by filing Form 8833 alongside the 1120-F Return and claiming an exemption under the Canada-US tax treaty.
1120 Corporate Tax Return - We prepare US corporate tax returns (Form 1120) for US corporations and assist Canadian businesses in expanding their operations into the United States. Our services ensure that your tax filings are accurate and compliant while guiding the nuances of entering the US market.
W8-BEN and W8-BEN-E Forms - We prepare W8-BEN and W8-BEN-E Forms for sole proprietors and corporations engaged in business activities in the United States. These forms help prevent US customers from withholding 30% tax from payments to your business, ensuring that you receive the full amount owed.
US FBAR and Form 8938 - Our cross-border tax accountants in Canada assist with preparing and filing the US FBAR (Foreign Bank Account Report) and Form 8938 (Statement of Specified Foreign Financial Assets). These forms are essential for US taxpayers with foreign financial accounts or assets, ensuring compliance with IRS reporting requirements.
US Form 8840 Closer Connection Exception Statement for Aliens - We assist with US Form 8840, the Closer Connection Exception Statement for Aliens. This form is crucial for individuals who may meet the substantial presence test but want to establish that they have a closer connection to a foreign country (e.g. Canada).
Incorporating US C-corporations for US Business Expansion - We help Canadians expand their businesses into the US market by incorporating US C-corporations. These corporations benefit from a low corporate tax rate and enable tax-efficient repatriation of profits to Canadian holding companies. Additionally, they provide liability protection for shareholders.
Creating US Limited Partnerships for Canadian Real Estate Investors - Our cross-border tax accountants in Mississauga and Toronto assist Canadians in forming US Limited Partnerships to invest in US real estate. US LPs provide several advantages, including liability protection for investors, the elimination of double taxation, and reduced capital gains taxes.
Forming US LLCs - We establish US LLCs for Canadians conducting business in the US. We take care to minimize double taxation by electing to classify the LLC as a US C-corporation. LLCs offer liability protection and simplify the process of doing business in the US.
Frequently Asked Questions - Cross Border Accountant Mississauga
How can I determine if I am a US tax resident?
You are considered a US tax resident if you are a US citizen, a US green card holder, or if you meet the US substantial presence test (SPT). The SPT is based on the number of days spent in the US, and if the total is 183 days or more, you qualify as a tax resident. The SPT is calculated as follows: (1) the total days spent in the US in the current tax year + (2) one-third of the days spent in the US in the previous tax year + (3) one-sixth of the days spent in the US in the year before that.
Am I required to file the US FBAR?
You must file the Report of Foreign Bank and Financial Accounts (FBAR) with the IRS if the combined total of your financial and bank accounts exceeds $10,000 US dollars at any point during the year. Failing to file the FBAR can result in a penalty of $10,000 US dollars for each undisclosed account. For FBAR purposes, Canadian RRSPs, TFSAs, and RESPs are considered reportable financial accounts.
Can I be a resident of both Canada and the United States?
Yes, it is possible to be a resident of both countries. This commonly occurs with US citizens who permanently reside in Canada. They are tax residents of the US due to their citizenship and tax residents of Canada because they live there permanently.
Do non-resident aliens of the United States need to file a US tax return?
Non-resident aliens, including Canadians, must file a US tax return if they earn certain types of US income, such as rental income, business income through a permanent establishment in the US, or employment income.
Are dual residents (Canada-US) subject to double taxation?
With proper planning, Canada-US dual residents can avoid double taxation. One common method is to claim foreign tax credits to offset taxes owed in one country against taxes paid in the other.
What is a dual-status tax return, and in what situations is it filed?
A dual-status tax return is filed by individuals who are both resident aliens and non-resident aliens during the same tax year. This return allows taxpayers to report income earned as a resident and as a non-resident.
Common scenarios for filing a dual-status return include:
● Change of Residency: An individual moves to the U.S. and becomes a resident alien after meeting the substantial presence test or obtaining a green card.
● Departure from the U.S.: A resident alien leaves the U.S. and does not meet the residency criteria for the remainder of the year, becoming a non-resident for that portion.
● Visa Changes: Individuals who begin on certain non-immigrant visas and later qualify as residents based on their length of stay.
● International Students: Students who start their studies as non-residents but later meet residency requirements during the year.
Filing a dual-status return can be complex, as it requires reporting income differently for each status and may limit certain deductions and credits. It's advisable for taxpayers in this situation to consult IRS guidelines or a cross-border tax accountant.
What is the first-year choice for new U.S. residents?
The first-year choice is a tax option for new U.S. residents that allows them to be treated as resident aliens for part of the year, even if they do not meet the substantial presence test. This option can be advantageous for individuals moving to the U.S. who want the benefits of resident tax treatment for the entire year.
To qualify, the individual must:
1. Be a resident alien for part of the year.
2. Have a tax home in the U.S. during the year.
3. Not have been a resident alien in any of the previous two years.
Examples:
● New Employee Relocation: An individual moves to the U.S. on January 5, becomes a resident alien by meeting the substantial presence test, and elects to be treated as a resident for the entire year to report worldwide income.
● International Student: A student arrives in the U.S. on July 28 and, although they do not initially qualify as a resident, chooses the first-year option to report all income earned while studying as a resident.
● Spouse of a U.S. Citizen: A non-resident alien spouse moves to the U.S. on November 30. By choosing the first-year option, they can file jointly with their U.S. citizen spouse, potentially benefiting from lower tax rates and various deductions.
Using the first-year choice can provide significant tax benefits, so understanding the implications and requirements is crucial. Consulting a cross-border tax accountant in Toronto is recommended.
What is the U.S. expatriation tax, and when does it apply?
The U.S. expatriation tax applies to U.S. citizens and long-term residents (green card holders) who renounce their citizenship or abandon their residency. The tax ensures that individuals who exit the U.S. tax system pay taxes on unrealized gains and other relevant income.
When It Applies: The expatriation tax generally applies if the individual is a "covered expatriate," meaning they meet one of the following criteria:
● Their average annual net income tax for the five years preceding expatriation exceeds a specified threshold ($178,000 for 2022, adjusted annually).
● Their net worth is $2 million or more on the date of expatriation.
● They fail to certify compliance with U.S. tax obligations for the five years preceding expatriation.
Examples:
● High-Income Professional: A U.S. citizen working overseas for several years with a substantial salary decides to renounce citizenship. They exceed the income threshold and have a net worth of $3 million, making them subject to the expatriation tax on unrealized gains over $600,000, necessitating careful tax planning.
● Retired Investor: A long-term green card holder with a $2.5 million investment portfolio moves abroad for retirement. They find that they meet the criteria for a covered expatriate due to their net worth and must plan for the expatriation tax on their investments, which could significantly impact their financial strategy.
Understanding the expatriation tax is essential for those considering renunciation, as it can have substantial financial implications. Consulting a cross-border tax accountant in Mississauga about expatriation issues is advisable.
What is a U.S. PFIC? Do U.S. PFICs require specific reporting?
A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets either of the following criteria:
● Income Test: At least 75% of its gross income is passive (e.g., dividends, interest, royalties).
● Asset Test: At least 50% of its assets are held for producing passive income.
PFICs can create complex tax implications for U.S. taxpayers, including unfavourable tax rates on gains and specific reporting requirements.
Reporting Requirements:
U.S. persons who own shares in a PFIC must file Form 8621 to report their investment, detailing any distributions or gains. Taxpayers may face special tax rules regarding excess distributions and gains, resulting in significant tax liabilities.
Practical Examples:
● Foreign Investment Fund: A U.S. citizen invests in a foreign mutual fund primarily generating income from dividends and interest. This fund qualifies as a PFIC, requiring the investor to report their interest in the fund on Form 8621, which may lead to unfavourable tax treatment.
● International Real Estate Company: A U.S. resident invests in a foreign real estate company that earns rental income (passive income). If over 75% of the company's income is passive, it is classified as a PFIC. The investor must file Form 8621 to report ownership and income received, facing increased tax on distributions or gains compared to regular investments.
Understanding PFICs and their reporting requirements is essential for U.S. taxpayers to avoid penalties and manage tax liabilities effectively. Consulting a cross-border tax accountant with international investment experience is recommended.
What is FIRPTA? When does it apply, how is it calculated, and what forms need to be completed?
FIRPTA (Foreign Investment in Real Property Tax Act) is a U.S. tax law requiring foreign persons to pay tax on gains from the sale of U.S. real property interests. Under FIRPTA, when a foreign person sells U.S. real estate, the buyer must withhold a portion of the sale price to ensure tax compliance.
When It Applies: FIRPTA applies when:
1. A foreign individual or entity sells a U.S. real property interest (e.g., land, buildings, or shares in a U.S. corporation primarily holding real estate).
2. The transaction is a disposition of a U.S. real property interest.
Calculation:
The withholding amount is generally 15% of the gross sale price for dispositions occurring after February 2016. This withholding covers potential capital gains tax liabilities.
Forms to Complete:
1. Form 8288: Used by the buyer to report and remit the withheld tax to the IRS.
2. Form 8288-A: Issued to the seller as a record of the withholding, used for their tax filings.
Examples:
● Foreign Individual Selling Property: A foreign national sells a rental property in the U.S. for $1 million. Under FIRPTA, the buyer withholds 15% ($150,000), sent to the IRS. The seller reports this transaction on their tax return and may adjust their tax owed based on actual gains.
● Foreign Corporation Selling Real Estate: A foreign corporation sells a commercial building in the U.S. for $5 million. The buyer must withhold 15% ($750,000) and remit this to the IRS. The corporation files a U.S. tax return to report the sale and may claim a refund if the actual capital gains tax liability is lower than the withheld amount.
Understanding FIRPTA is crucial for foreign investors in U.S. real estate to ensure compliance and manage tax obligations effectively. Consulting a cross-border accountant about international transactions is advisable.
What is the foreign-earned income exclusion?
The Foreign Earned Income Exclusion (FEIE) allows U.S. citizens and resident aliens to exclude a certain amount of their foreign-earned income from U.S. taxation. For 2024, the exclusion limit is $126,500 per qualifying individual.
Criteria to Qualify
To qualify for the FEIE, you must meet the following criteria:
1. Foreign Earned Income: The income must be earned from working in a foreign country. It does not include passive income (like dividends or interest).
2. Tax Home: Your tax home must be in a foreign country. This generally means that your main place of business, employment, or post of duty is in that foreign country.
3. Presence Test: You must meet one of the following tests:
○ Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an entire tax year.
○ Physical Presence Test: You must be physically present in a foreign country for at least 330 full days during a 12-month period.
Form to Complete
To claim the FEIE, you must complete Form 2555 (Foreign Earned Income). This form is filed with your annual tax return (Form 1040).
Practical Examples
1. Example 1: American Teacher in International School
○ Client: Sarah is a U.S. citizen who took a teaching position at an international school in Thailand. She has lived there for two years and plans to stay for several more. Her annual salary is $80,000.
○ Benefit: By claiming the FEIE, Sarah can exclude her entire salary from U.S. taxation, allowing her to keep more of her income to save or spend while living abroad.
2. Example 2: U.S. Expat Working for a Foreign Corporation
○ Client: Mark is a U.S. citizen working for a European corporation in Germany. He has lived in Germany for over a year and has earned $150,000 in the last tax year.
○ Benefit: Mark can exclude $126,500 of his income under the FEIE, meaning he only pays U.S. taxes on the remaining $23,500. This significantly reduces his overall tax liability.
By understanding and utilizing the FEIE, individuals can optimize their tax obligations while living and working abroad. Consult with a cross-border tax accountant in Toronto or Mississauga to determine if you qualify for the FEIC.What is the housing exclusion?
The Housing Exclusion allows U.S. citizens and resident aliens living abroad to exclude certain housing costs from their taxable income when claiming the Foreign Earned Income Exclusion (FEIE). This can be particularly beneficial for expats whose housing expenses exceed the average housing costs in the area where they reside.
Criteria to Qualify
To qualify for the Housing Exclusion, you must meet the following criteria:
1. Foreign Earned Income: You must qualify for the FEIE, meaning your income must be earned while working in a foreign country.
2. Tax Home: Your tax home must be in a foreign country.
3. Housing Expenses: The housing expenses must be for a foreign residence that you occupy while living abroad.
4. Limitations: The exclusion is limited to the lesser of:
○ Your actual housing expenses (including rent, utilities, and other eligible costs).
○ The maximum exclusion amount. This amount varies by location and is set based on the U.S. government's standard for housing costs.
Form to Complete
To claim the Housing Exclusion, you must complete Form 2555 (Foreign Earned Income) and provide information about your housing costs within that form.
Practical Examples
1. Example 1: U.S. Software Engineer in Germany
○ Taxpayer: Jessica is a U.S. citizen working as a software engineer in Munich, Germany. She pays $2,500 in rent and $500 in utilities each month, totalling $36,000 annually, which her employer reimburses.
○ Benefit: Since her housing expenses exceed the base amount for Germany, she can claim a housing exclusion for the majority of her housing costs, reducing her taxable income significantly.
2. Example 2: American Expat Family in Australia
○ Taxpayer: Tom and his family moved to Sydney, Australia, where he works as a project manager. His employer pays $4,000 each month for Tom’s rent, totalling $48,000 annually.
○ Benefit: Given that Sydney has higher living costs, Tom can claim a substantial portion of their housing expenses as a housing exclusion, effectively lowering his taxable income and tax liability.
These examples illustrate how the Housing Exclusion can benefit expats while emphasizing the specific situations that determine eligibility. Consult with a cross-border tax professional in Canada to determine if you qualify for the Housing Exclusion.
What is the difference between short-term and long-term capital gains?
The difference between short-term and long-term capital gains primarily lies in the holding period of the asset before it is sold and the tax rates that apply to each type of gain.
Definitions
● Short-Term Capital Gains: These are gains from the sale of assets held for one year or less. Short-term capital gains are taxed at ordinary income tax rates, which can be as high as 37% for high-income earners in the U.S.
● Long-Term Capital Gains: These gains are from the sale of assets held for more than one year. Long-term capital gains benefit from lower tax rates, typically ranging from 0% to 20%, depending on the taxpayer’s income level.
Practical Examples
1. Example 1: Short-Term Capital Gain
○ Asset: Stocks
○ Purchase Date: January 5, 2023
○ Sale Date: September 10, 2023
○ Purchase Price: $5,000
○ Sale Price: $7,000
○ Gain: $7,000 - $5,000 = $2,000
○ Tax Rate: Assuming a marginal tax rate of 24% for ordinary income.
○ Tax on Gain: $2,000 × 24% = $480
In this case, since the stock was held for less than a year, the gain is considered short-term, and the tax on the gain is calculated at ordinary income rates.
2. Example 2: Long-Term Capital Gain
○ Asset: Real Estate
○ Purchase Date: March 1, 2019
○ Sale Date: April 15, 2023
○ Purchase Price: $300,000
○ Sale Price: $400,000
○ Gain: $400,000 - $300,000 = $100,000
○ Tax Rate: Assuming a long-term capital gains tax rate of 15%.
○ Tax on Gain: $100,000 × 15% = $15,000
Since this property was held for over a year, the gain qualifies as long-term, leading to a lower tax rate on the profit.
Summary
In summary, the key difference between short-term and long-term capital gains lies in the holding period and the applicable tax rates. Short-term gains are taxed at ordinary income rates, while long-term gains benefit from reduced tax rates. Cross-border tax accountants in Toronto and Mississauga can help you correctly classify your gains and losses.
What are the tax implications for Canadians who carry on business in the US through a US LLC?
Operating a U.S. business through an LLC as a Canadian resident can lead to various tax complications including double taxation. Understanding how both the IRS and the Canada Revenue Agency (CRA) classify the LLC and the implications for taxation on distributions is crucial.
IRS Classification of the LLC
The IRS allows an LLC to choose its classification for tax purposes:
● Single-Member LLC: If the LLC has one owner, it is treated as a disregarded entity by default. This means the income is reported on the owner’s personal tax return (Form 1040 or 1040-NR), and the LLC itself does not file a separate tax return.
● Partnership: If there are multiple members, the LLC is typically classified as a partnership unless another classification is elected.
CRA Classification of the LLC
For Canadian tax purposes, the CRA generally treats a U.S. LLC as a foreign corporation. This classification means that the LLC is not considered a flow-through entity in Canada, which affects how income and distributions are taxed.
Taxation of Cash Distributions
1. Cash Distributions from the LLC to the Sole Member (U.S. Tax):
○ Since the LLC is treated as a disregarded entity, the profits generated by the LLC are subject to U.S. tax at the individual level on the member's tax return. Cash distributions are not taxed again at the time of distribution, as they represent a return of previously taxed income.
2. Cash Distributions from the LLC to the Sole Member (Canadian Tax):
○ When the Canadian resident receives distributions from the LLC, these amounts must be reported as foreign income/dividends on their Canadian tax return. The income is taxed at the individual’s Canadian tax rates.
Foreign Tax Credit Limitation
In Canada, the resident can claim a foreign tax credit for U.S. taxes paid on the cash distribution received. However, the credit is limited to the lesser of:
● 15% of the cash distribution received; and
● The US taxes payable.
The foreign tax credit limitation can result in double taxation.
Summary
The arrangement of a Canadian resident operating a U.S. LLC involves complex tax implications with respect to both U.S. and Canadian tax systems. Taking the advice of a cross-border accountant can help you avoid double taxation.
What should Canadian tax residents know before applying for a US Green Card?
Canadian tax residents considering applying for a U.S. Green Card should be aware of several important tax implications. Here are three key areas to focus on:
1. U.S. Tax Obligations
Once a Canadian resident obtains a U.S. Green Card, they become a lawful permanent resident (LPR) of the U.S. and are subject to U.S. tax on their worldwide income. This means they must file U.S. tax returns (Form 1040) and report all income to the IRS, including income earned in Canada.
Example:
● Situation: Sarah, a Canadian accountant, obtains her Green Card and continues to work in Canada while living part-time in the U.S.
● Tax Implication: Sarah must report her Canadian salary and any other income (e.g., rental income from a Canadian property) on her U.S. tax return. She may also need to pay taxes in Canada, leading to potential double taxation, which can be mitigated by claiming foreign tax credits.
2. Foreign Bank Account Reporting (FBAR)
As a U.S. Green Card holder, Canadian residents must comply with the Foreign Bank Account Reporting (FBAR) requirements if they have financial accounts outside the U.S. with an aggregate value exceeding $10,000 at any time during the calendar year.
Example:
● Situation: John, a Canadian resident with a Green Card, has a Canadian bank account and investment accounts totalling $15,000.
● Tax Implication: John must file an FBAR (FinCEN Form 114) annually to report his Canadian accounts. Failure to comply can result in significant penalties.
3. Tax Treaty Considerations
The U.S. and Canada have a tax treaty that aims to prevent double taxation and determine which country has taxing rights over specific types of income. However, understanding how the treaty applies is crucial for effective tax planning.
Example:
● Situation: Lisa, a Canadian resident who becomes a Green Card holder, receives a pension from her Canadian employer.
● Tax Implication: Under the U.S.-Canada tax treaty, Lisa may be able to reduce or eliminate U.S. taxes on her Canadian pension, but she will still need to report the income. Understanding the treaty provisions will help Lisa navigate her tax obligations in both countries effectively.
Summary
Before applying for a U.S. Green Card, Canadian tax residents should consider the implications of U.S. tax residency, the need to file FBARs for foreign accounts, and the complexities introduced by the U.S.-Canada tax treaty. Consulting with a tax professional who specializes in cross-border taxation can help in planning and compliance.
Client Testimonial:
I had a great experience with Madan Chartered Accountant Firm. I required a US Tax number their knowledge was invaluable to me. I received my tax number in short order at a very reasonable cost. Thank you Brandon for all of your help - Leslie Whitton, President of D-Fence Products Inc.
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I work in the US and Canada as well. On my 1099 slip it shows the income taxes, social security and the medicare taxes paid.
What amount should I report on the T1 return to claim foreign tax credit?
Hi Enrico,
Hi, you should report all the income taxes, social security and the medicare taxes paid as shown on the 1099 slip. Please be sure to convert the amounts in CDN using the average conversion rate for that year.
Thank you.
Hi, I have an US LLP which owns an LLC which further owns a rental real estate. The value of the real estate is more than $100,000. Should I report this on the T1135 form?
Hi Maurice,
If the cost of the shares of the LLP is less than $100,000, you wouldn’t have to file the T1135 form.
If I move to the USA and become a non resident in Canada. Will I be able to vote and apply for benefits such as CCTB and GST Credit.
Hi Martin,
The citizenship status wont be affected with your non residency for tax purposes. You would still be able to vote however, the benefits payments such as the CCTB and GST credits wont be available to you as you for them you have to be a resident of Canada.
Hi
What would be my tax implications if I earn USD$ 90000/ year for a company based in New York but I work from home here in Ontario. If the company deducts US taxes will I receive a credit when I file my taxes and what amounts will I be liable for if the company does not deduct any US taxes.
Thanking you for your help.
Hi Maddy,
If you receive a W2 and are an employee of an American company, you will have to report and pay tax on your US earnings in both the US and Canada.
You will have to file a 1040 NR (US return) and a Canadian Tax Return (T1). To avoid double taxation, you will receive a foreign tax credit on your Canadian tax return for American taxes paid.
However, if you operate as a self employed person from Canada, then you do not have to file a US return. You still have to file a Canadian tax return and pay Canadian income taxes on your US self employment income.
Thanks,
Hello Allan,
I recently went to Florida for my sister’s birthday and we went to the casino. I ended up getting a fair
amount of winnings. Are there any implications when I come back home to Ontario? IS there anything I
need to know before coming home?
Thanks,
Gerri
Hi,
If I have a S corporation in the U.S with me owning 33% of it, then how do my taxes get filed?
Thanx
Hi Moe,
If you are a Canadian resident, then you will be double taxed. You will first pay US personal taxes on your share of the S-corporation’s taxable profit. You will then pay Canadian personal taxes on any distributions (i.e. dividends) paid to you by the S-corporation.
The CRA does not recognize S-corporation’s as flow-through entities, but instead classifies them as foreign corporations. You will not receive a foreign tax credit on your Canadian tax return for the American taxes paid.
I want to invest in the US in Real Estate (flipping house or buy/renovate & sell) in Atlanta. I am Canadian citizen. What kind of company should I set up (LLC/Corporate/ LP)? I just want to minimize taxes when transferring the money to Canada
Hi Anil,
Create a LP in Atlanta and have the LP purchase the properties. This will allow you to avoid double tax and limit your liability.
Hello Madan & team,
I was working in the US until Jan 2018, and was a green card holder. Left Canada several years ago and did not have income in Canada. Everything was fine until this week.
I took a job with the Federal Govt.and moved to Canada this week. I plan to stay on the US side to visit family and also maintain residency requirements for the family. I get paid in Canada, but found s place to live in the US side and will commute. Can be Managed as I will be alone in Canada. Rest of the family is still in USA.
For 2018 USA tax, I intend to file MFJ, declare the US income from my spouse and my Canadian income.
For 2018 Canada tax, I plan to file my income alone, as the family is not claiming anything from Canada.
Also, since we (family in US, and me commuting from US side in to Canada) technically don’t live in Canada, I suppose we will not get health coverage for any of us from Canada. Also, GST credits cannot be claimed. Any complication you see here, pls advise so we can correct and comply. Thanks!
Hi BVP, your understanding is correct. You will have to file a non-resident return with the CRA and pay Canadian income taxes on your Canadian income. To avoid double taxation, you can claim a foreign tax credit on your US return for the American taxes paid.
Hi there,
When I left Canada and moved to US (to take up jobs) in 2016, I filled NR73 and stated in there to CRA that I have house, credit cards, accounts in RBC and TD Bank, driver’s license, health cards, TFSA, RRSP for me and my spouse in Canada. However, I was still termed as deemed non-resident in Canada, which was surprising. Do you agree with that assessment or should I write back to CRA regarding residency status? I file income tax return for the rental income (Part 13 return, have NRK account, request NR6 performa). For 2016, I filed my income tax return for part of year (3 months) when I was in Canada and then for the remainder of year as a resident alien in US (since I met the substantial presence test, more than 183 days). While filing my US income tax return, do I need to declare my TFSA accounts (they have non-redeemable GICs) in Canadian bank? If so, how?
Thank you
Hi Saurabh, pursuant to the Canada-US tax treaty, you are a resident of the country where your permanent home is located. As I understand, you have a rental property in Canada, and not a home in Canada where you can live. That is likely the reason the CRA said that you became a non-resident of Canada after you moved to the US.
You have to file forms 3520 and 3520A with the IRS in respect of your Canadian TFSA.
Hi Alen
I am a canadian citizen who maintain residential ties in Canada ( my wife lives in Canada) but I live and work in US. I am a resident of US for tax purposes … Am I considered deemed non resident now in Canada?
Hi Goli, according to the Canada-US Tax Treaty, you are a resident of the country where your permanent home is located. A permanent home can either be rented or owned. However, if you have a permanent home in both countries, then you are a resident of the country where your personal and economic ties are strongest.
I do not have enough information about you and your ties to help you make a determination on your residence status. However, you could be considered as a Canadian tax resident because you have a home in Canada and your wife lives in Canada. In other words, you are in the US only for work, while you maintain ties to Canada.
Hello Allan,
I’ve been watching your videos and reading your articles and you are very informative. Thank you!
I live in Toronto, and willing to open an online store. I will most probably get sales from the US. Do I need a cross border bank account? Will my taxes be cross border?
Thanks.
Hi Maria,
Your Canadian company will not be liable for US profits tax, unless it has a fixed place of business in the US. If you plan on collecting US dollars from customers, then your company should open up a US dollar business account with a Canadian bank.
1. As a US citizen, living in Canada and a CA Resident, should I avoid interest bearing savings (i.e TFSA) and checking accounts?
2. Recently married, should we file joint or separate? Wife (CA citizen) and myself (US citizen and CA resident). Should we hold joint checking or saving account?
Hi Mike,
Thank you for your questions. Avoid opening up a TFSA because TFSA’s are treated as non-resident trusts for US tax purposes. As a result, income earned in a TFSA is taxable in the US. In addition, TFSAs result in additional tax compliance for US citizens; specifically, forms 3520 / 3520A have to be filed for a TFSA owned by a US citizen.
Canadian checking and savings accounts are okay for you to hold. Have your spouse keep her accounts separate from yours, so that they do not need to be reported to the IRS on the US FBAR.
If you file jointly with your spouse, you will receive a higher standard deduction and you will benefit from tax rates applicable for joint-filers, which are better than those for separate filers. However, if your spouse is a high income earner, you may be pushed into a higher tax bracket, making you worse-off. To determine whether MFJ or MFS is better, prepare you returns under both methods to determine which one results in overall lower taxes.
I worked in the US on W-2 for less than 183 days. I had at-source deduction of taxes for Federal, State and SS & Medicare.
I suppose I need to file 1040NR but do I have to file
-Form 8833 as well to indicate the US-Canada treaty to avoid double taxation and where can I find the tax treaty number for that and Form 8840 for closer connections?
Hi Bhupinder,
Complete form 1040-NR (non-resident alien tax return) and form 8840 (closer connections to Canada). Form 8833 is not required if you are completing form 8840.
I am a Canadian citizen in the US on an F-1 student visa. I left Canada and have minimal ties (driver’s license, bank account with <$500). I want to change my last tax return as I did not tick the box saying I left Canada during the tax year. What documents do I need to mail with my T-1 adjustment form? And is this change of return sufficient or must I file NR 73?
Hi Mel,
You will have to file form NR73 with the CRA since you have already filed your return without ticking the box for emigrating from Canada in the year. You cannot amend your return without filing form NR73 first.
Hello, my husband and I who are Canadians, are going to invest in some real estate and some funds within the USA, and we are hoping to find a cross border accountant who can help us minimize our taxation by setting up the correct structure in the US. Is this something your company can help us out with? Could we have a phone call and discuss?
Hi Wendy,
Sure, I would be pleased to speak with you. To book an appointment with me, please contact my assistant Sade: sade@madanca.com
I am a dual citizen residing in the United States but want to return home to Ontario- I have American property to sell and I want to buy a home in southern Ontario- I have An IRA and am eligible for social security- I need tax advice to ensure I do the move correctly
Hi Brook,
I would be pleased to provide you with the tax advice you require. The fee for a 30-minute consultation is $110 + tax. To book an appointment with me, please send an email to amadan@madanca.com
My wife got a Postdoctoral position in France for 2 years and we are Permanent resident of Canada. I(spouse) will be going back and forth while the children will be with her. I learnt France will tax her income already. Will she need to pay as a factual resident tax in Canada as well?
Hi Kola,
If she moves to France with her children, and (a) she does not maintain a home in Canada, and (b) you, her husband, are not residing in Canada, then she will be treated as a non-resident of Canada for tax purposes. This means that her French income will not be taxable in Canada.
Hi, I moved to Canada in November 2018 for a full-time job for a Canadian subsidiary of a US company. This year I will move to the US to work from the HQ in the US. I have the option of moving between June and September of 2020. I do not own real estate anywhere and I would be moving with my spouse. Given the 183 day residency rule, is it better to move before or after July 1st to minimize my tax burden to the US and Canada? Thank you.
Hi Polly,
The 183-day rule applies to non-residents of Canada who are visiting Canada. Furthermore, the 183-day rule is trumped by the tax treaty between Canada and the US. According to the tax treaty, you are a resident of the country where your permanent home is located. A permanent home can either be rented or owned.
It appears that you are a part-year resident of Canada pursuant to the Canada-US tax treaty for the 2020 year because your permanent home is located in Canada, where you live with your spouse (since November 2018). Therefore, whether you move to the US in June or September, you will still be considered a tax resident in Canada for part of the year (up to the date of your relocation to the US).
I am a single Canadian citizen, no-dependents starting working in the US this summer on TN visa for 3 years. I own no property in Canada only bank accounts. What forms will I need to fill out during tax-time next spring? I presume I would become a non-resident of Canada for tax-purposes also since I would fulfill the significance presence test in the US.
Hi Joe,
Based on the information provided, you will become a non-resident of Canada when you move to the US. As such, you should file a departure return with the Canada Revenue Agency. In addition, for the first year, you should file a dual-status return with the IRS. Please let me know if you would like my assistance in preparing these returns.
I am a permanent resident of Canada working in the US on work visa. Due to COVID, I am currently working remotely from Canada. Is there a duration that I can work remotely without becoming a tax resident of Canada. I have a rental house in the US, family is with me . Do I or company needs to pay taxes to CRA
Hi Ashish,
Your US employer is required to comply with Canadian payroll regulations if you are working remotely in Canada. This means that your US employer must deduct Canadian payroll taxes from your paychecks and remit the deductions to the CRA. In addition, your US employer must issue a T4 Wage Slip for the days that you worked in Canada.
Second, you may be considered a factual resident of Canada if you are working and living in Canada as a permanent resident with your family. Practically, if you leave in a few months and move back to the US, you can argue that your stay in Canada was of a temporary nature due to Covid-19 and therefore you are a non-resident of Canada.
Hi, I am a resident of Canada and earn foreign income from Trinidad (tax treaty exist) the employer however does not withhold the taxes so I believe I may be considered self- employed. With that being said I am assuming all taxes will just be paid here in Canada? Are you required to earn this money in Canadian dollars, in a Canadian bank account? Seeing that I have been working under my name and this one company pays me do I need to register in Ontario as a sole proprietorship for tax purposes?
If you work for a single company and are paid a salary, you are an employee, even if the employer does not deduct payroll tax. Report your foreign employment income on line 104 of your T1 Canadian personal tax return and pay Canadian (Federal + Provincial) income tax. Do not register as a sole proprietor. Convert the Trinidad dollars into Canadian dollars using the average exchange rate for the year.
Hi. We are relocating to France for 12 months, I will be returning to Canada to work every third month as a dentist. My wife will be working remotely while away as a canadian lawyer. Would we have french tax obligations? Keep our primary house but rented it out while we’re away.
Since your relocation to France is of a temporary nature, you and your wife will continue to be tax residents of Canada. Tax residents of Canada are taxable on their global income. Consider filing a subsection 45(2) election to keep the principal residence exemption while you are away in France. I suspect that you will pay tax to France on income earned in France, but please check with a local French accountant.
Hi,
I would like to obtain a quote for filing US Federal and State income taxes for a C corporation that are overdue.
The business is registered in Delaware but it did not have any revenue yet.
Do you provide services for US based Corporations?
Thank you,
Daiane
We do file US corporate tax returns. Our fee to prepare a US corporate tax return (1120) starts from $1,500 CAD + disbursements and taxes.
Hi. I work as a professor at a Canadian university and expected to receive my US green card through my mother (who is American). I intend to continue to work in Canada 3 days of the week and in the US 4 days. Should I pay my Canadian income to US or Canada? Also, is there a risk of loosing the green card if I declare non-resident alien on my US tax returns?
If you maintain a home in Canada and your personal and economic ties are stronger to Canada than the US, then you are a deemed resident of Canada pursuant to the Canada-US tax treaty. This means that you must pay tax to the Government of Canada on your global income. As a green card holder, you cannot file a non-resident tax return with the IRS. You must file a 1040 resident return. To avoid double taxation, claim foreign tax credits.
US/CAN dual citizen working remotely for Toronto company. I want to move back to USA but keep my Canadian remote job until I find a USA one. What should I know for taxes and is there anything my employer must do differently?
Also what about the other way around? What would be the implications to be a W2 employee using a us address but living In Canada? Could I be a employee and just be responsible to pay taxes?Thank you.
Hi Ricardo,
Pursuant to the Canada-US tax treaty, employment income is taxable in the country where the employment services are performed. As such, if you are working in the US for a Canadian employer, then your Canadian employer must remit US payroll taxes and issue a W2 slip to you.
On the flip side, if you are working in Canada for a US employer, then your US employer must remit Canadian payroll taxes and issue a T4 slip to you.
To Whom It May Concern: I am a professor at a Canadian University and I am trying to move the US while keeping my job and continuing to teach online. Would I be able to do this without becoming an independent contractor? I would be living in the US but coming to Canada for a 13 week stint each year to teach some courses in person. If it’s relevant, I’m also a dual citizen (US/Canadian).
Thank you!
Hi Peter,
Yes, you can do this without becoming an independent contractor. File a T1 non-resident return each year with the CRA and pay Canadian income tax on your teaching income.
Hello,
I’m working in US and I have my PR of Canada. Do I have to pay tax for my US income while filing tax for Canada?
Thanks!
If you are a factual resident of Canada or a deemed resident of Canada pursuant to the Canada-US tax treaty, then you must pay tax to the Government of Canada on your global income.
Hi,
My name is Akash. I moved to Vancouver, BC on September 22nd, 2022 from Seattle, WA. I work at the same company in Vancouver as I was working for in the U.S. I have a W2 and a T-4, and need to file both U.S and Canada taxes. I had a stock grant from my company which was awarded in the U.S but vested in Canada, due to which I was doubly taxed. Are you able to help me with filing my U.S and Canada taxes. Thank you.
I’m very sorry for the late reply and I hope that you were able to file your returns. We do prepare both US and Canadian tax returns. The starting price for a Canadian tax return is $260 CAD, and the starting price for a US tax return is $450 CAD. Disbursements are extra.
The Canadian government withdraws more taxes from our Canadian retirement income than we can use as a foreign tax credit on our US tax payment.
We are citizens of the US and now permanent residents. How do we get the almost 20k Canadian being withheld in Canada?
Consider filing a Section 217 Return with the CRA to recover all or a portion of the withholding tax deducted.
We are thinking about retiring back to Canada and had some tax questions.
Please send an email to me with your questions: amadan@madanca.com Note that the fee for a 30 minute session with me for tax advice is $130 + tax. To book an appointment, please go here: https://madanca.com/contact-us/
I invest in start-ups though syndication (SPVs) via US LLC with less than 5% ownership. Due to the nature of start-ups investing, a distribution will only be realized if there is a liquidation event for the start ups (i.e. IPO or M&A), which might take a decade if it happens. Do I have any US and/or Canadian tax filing obligations in the mean time?
If a liquidation event does occur, what will my tax filing obligations and liabilities be in US and Canada?
In my research it appears that since Canada deems US LLCs as corporations, there may be some double taxation risk. Is there a way to plan to avoid double taxation.
Hi Sam,
Canada deems LLCs as foreign corporations. There is the possibility of double taxation during the period of ownership. If the cost amount of the units, including the cost of any other foreign property that you own, is more than CAD 100,000 at any time in the year, then complete form T1135, foreign income verification statement and file it with the CRA.
Note that distributions made by the LLC to you should be recorded as foreign dividends on your Canadian personal tax return. In addition to this, you should file a 1040-NR tax return with the IRS to report the income/loss attributed to you from the LLC in the year. Lastly, a foreign tax credit can be claimed on your Canadian tax return; the FTC is limited to the lesser of 15% of the gross distribution received and the US income taxes paid.
I’m planning to move my family from Canada to the US on E2 visa. I’m going to sell our house and sever residential ties with Canada when we leave. However, if we leave in Aug and stay in US for the rest of the year we would not meet the substantial presence test for the US tax residency. So I wonder if CRA will think we are still tax resident for Canada for the whole year. This is important to me because we came to Canada on PR in Sep, 2019 and if we don’t emigrate within 60 months of being Canadian resident, we would face departure tax of our properties acquired before we came to Canada. So, we want to make sure CRA recognize our departure date before Sep and qualify us as non-resident for the rest of the year. My concern is that if US does not classify us as tax resident for 2024, Canada may still think we are tax resident for the whole year and thus we would face departure tax applicable to all of our properties.
Hi Arya,
If you do not meet the substantial presence test for 2024, but you meet the substantial presence test in 2025, you can choose to be treated as a U.S. resident for part of 2024 and be taxed as a dual-status individual for 2024. The following conditions must be met:
* You are present in the United States for at least 31 days in a row in 2024 (e.g. August 1 to August 31, assuming you move to the US on August 1), and
* You are present in the United States for at least 75% of the number of days following the 31-day period, starting August 1 and ending December 31, 2024 (assuming you move to the US on August 1).
You can therefore be treated as a non-resident of Canada effective August 1, 2024.
I just moved to Canada this last November, I get my PR next February. I was curious if you do cross boarder taxes for duel citizens? What paper would I need for duel citizen taxes?
Hi Greg,
Yes, we do offer cross-border tax services including the preparation of US 1040 tax returns for US citizens and T1-Part-Year tax returns for new Canadians. I will help you avoid double taxation through claiming foreign tax credits. Please complete these checklists and return them to me:
https://madanca.com/t1-personal-tax-return-checklist/
https://madanca.com/us-tax-return-checklist/