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U.S. Cross-Border Tax Services for U.S. Citizens and Green Card Holders Residing in Canada

U.S. citizens and permanent residents are some of the most traveled sections of the world population. With the ever-expanding global economy and the ease in ability to travel and communicate instantaneously, U.S. citizens are empowered to move outside of the United States, while maintaining their close connection to home. As Canada is one of its two closest neighbors and shares strikingly similar values, beliefs and customs, American citizens are settling in Canada at increasingly higher rates. Although these Americans will begin or continue to file Canadian tax returns based on their Canadian residency, the United States tax system does not let them off the hook. The United States taxes based on a worldwide taxation system, rather than the territorial system employed most commonly around the world, and therefore, U.S. citizens and permanent residents (Green Card holders) residing in Canada, are still required to file U.S. taxes and comply with certain reporting requirements, despite their Canadian tax filings.

cross border taxes for expats

The application of cross border tax compliance for U.S. citizens and permanent residents can be complicated. There are foreign tax credits that can be applied to reduce or eliminate taxes paid, foreign bank accounts that must be reported and Canada-U.S. tax treaty positions that can be taken to avoid paying double tax. When engaging the U.S. tax system while living in Canada, ensure that you are properly supported by U.S. tax professionals that can properly assist you, your business or clients in properly complying with all of the necessary laws.

Foreign Earned Income Exclusion and Qualified Housing Expenses Deduction

For taxable years beginning in 2018, the maximum previous foreign earned income exclusion is US $104,100

Form 2555

  • Our tax professionals can assist in utilizing and recognizing some of the most advantageous provisions of the United States Internal Revenue Code. In preparing your taxes, U.S. citizens and permanent residents can exclude US $103,900 (for 2018) of your income earned abroad, per person. In addition to the foreign earned income exclusion of §911(a)(1), a previous qualified individual may make a separate election to exclude from his or her gross income an amount equal to his or her previous housing cost amount. There are additional deductions that can be made as well.
  • These deductions and exclusions assist in reducing the tax burden on U.S. citizens and permanent residents living in Canada with tax obligations to the IRS. These deductions can only be claimed by producing the appropriate IRS Forms which tax professionals can take care of for you.

Foreign Tax Credit (FTC) & Deduction for Foreign Taxes Paid

The U.S. domestic tax law allows a foreign tax credit, with certain limitations, for U.S. residents (individuals and corporations) who pay foreign taxes. Alongside deductions and credits permitted by the Internal Revenue Code, certain tax treaties between the U.S. and foreign governments permit the application of a Foreign Tax Credit or Deductions for Foreign Taxes paid. These are differing filings, the Foreign Tax Credit is a dollar for dollar credit on taxes paid to a foreign government, if you have specific financial withholdings by that government even of passive income activities. This is not a deduction of the tax rather you are reducing your tax burden itself.
Conversely, you could choose to utilize certain deductions to taxes paid for certain activities such as property, GST/VAT paid and other non-income based taxes outside of the U.S. Our tax professionals will assist in determining the best method to utilize to reduce or eliminate U.S. taxes owed. Proper planning and tax preparation is required in this complex area but a qualified U.S. tax professional can assist in navigating these complex areas that provide immense benefit.

Treaty positions, Planning, Income Characterization and Sourcing of Income

As noted above, proper tax planning can provide significant benefits for you the taxpayer specifically avoiding double taxation. Our tax professionals can assist at the outset of your move outside of the U.S. or can develop a plan that will permit you to utilize the various tax treaties that the U.S. has with different governments. Our team will analyze your situation, provide information about how your income is characterized and U.S. tax laws and provide practical guidance to develop a tax position that will save you money.
Certain individuals have a more complex tax structure than others. Whether you are a high-flying executive with income being generate around the world or if you are an employee of a Canadian based company who receives a salary, there is a nuanced approach to where your income is generated, how it is characterized and what treaty benefits you can derive from these characterizations. These determinations are often complex in nature but have a discernable benefit when it comes to filing your U.S. taxes.

Pre-Immigration Tax Planning

When uprooting your life and moving outside of your home jurisdiction, there are many thoughts that enter individual’s minds. Finding a place to live, opening bank accounts and securing schooling for your children come to mind. Before you engage in the process of moving jurisdictions it is incredibly beneficial for you to plan accordingly, especially in light of the severe tax consequences if you don’t.

For individuals who are living in Canada and have head of ‘expatriating’ there are additional consequences. As you have undoubtedly know from the various other sections of this site, U.S. citizens and Green Card holders living in Canada are required to file U.S. tax returns each year and must report financial accounts to the U.S. Many people find this burdensome and seek to renounce their U.S. citizenship or give up their Green Card. Not so fast. Doing so may subject to an expatriation tax under Section 877A of the Internal Revenue Code. Being a covered expatriate for citizens and long-term U.S. permanent residents is not an enviable situation to be in.

Before moving to Canada as a U.S. citizen or U.S. Green Card holder (even if you are a Canadian citizen) be sure you understand all of the implications. Our professionals would be glad to go over the ins and outs of the tax implications of your move and assist in preparing a pre-immigration tax strategy to help you move in a tax efficient manner.

Personal, Immigration and Family Matters

Personal income tax compliance services for individuals

There are many different life events that can impact you or your family down the line. Whether you are marrying a U.S. citizen, planning on having a child while you are abroad or planning on retiring in a different jurisdiction, there are many tax obstacles that can and must be navigated.
Our tax professionals can help guide you through any misunderstandings you may have and provide useful information to help plan for the next steps. We want to help individuals maximize their tax benefits and savings and prevent any potential tax complications.

U.S. Green Card Holder and a Citizen and Tax Resident of Another Country

U.S. Green Card holders and permanent residents offer the unique situation where you are either taxed as U.S. permanent resident or you have the ability to file non-resident U.S. tax returns. This is a complex determination that must be made with appropriate support and guidance. If you had a Green Card and are not sure if you have effectively ‘abandoned’ it, you are a current Green Card holder or you are unsure of your status, our tax professionals can assist in understanding your status and filing the appropriate forms to reduce your tax burden and give you piece of mind that you have properly complied with U.S. tax laws.

Do you own a bank account outside of the US? Shareholder of a non-U.S. company?

Foreign Bank Account reporting has become an hot topic around the media and tax professionals. If you have received an IRS form from your financial institution or are required to file U.S. taxes, you may be required to file certain information reporting documents with the IRS. Although these documents fall under the reporting category and are not subject to tax, failure to report or improper reporting can lead to harsh penalties from the IRS.
Even if you have a non-U.S. based company and are reporting losses, you still may be required to report. Our tax professionals will assist in identifying the types of account that you are required to report and will prepare and file these forms on your behalf.

Business and Investment Matters

When a U.S. citizen or Green Card holder owns a foreign corporation, there are likely implications under the U.S. tax concept of a controlled foreign corporation (CFC.) CFCs arise through direct ownership or even indirect ownership of a foreign corporation. Income, such as certain types of passive income and other income derived in transactions among related parties, may be considered subpart F income, which would lead to tax on that income to a U.S. shareholder of the corporation. Investments in U.S. property may also lead to tax on the U.S. shareholder.

Proper planning may be able to mitigate exposure of this type of tax. Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, may be required to be filed. Form 8938, Statement of Foreign Financial Assets (FATCA Form) may also be required to be filed.

Our tax professionals can assist in pre-planning of investments in foreign enterprises, beginning your own business, becoming a part of a partnership or accepting a position as an officer or director of a foreign company. We also assist in the structuring of loans and cross border transactions as it relates to investments in foreign companies. Each of the forgoing instances have significant implications for U.S. citizens and Green Card Holders living outside of the United States. These actions require careful analysis and planning to ensure compliance with U.S. tax laws. If you have already made an investment or have engaged in one of the above related transactions and are unsure of the U.S. tax implications, a thorough review of your circumstances can ensure that you maintain or that you are required to become U.S. tax compliant.

U.S. Estate and Gift Tax Planning

Oftentimes individuals are not interested in discussing estate planning. It can be hard to consider the next stages of life and ultimately passing your wealth to your children or grandchildren in a tax efficient manner. Although this may be, there are significant opportunities that U.S. citizens and Green Card holders must be aware of when considering how they will pass their wealth to the next generation.

There are a couple of significant figures that individuals must be aware of when it comes to U.S. estate and gift tax planning. For example, for a decent who passes in calendar year 2018, the basic exclusion amount is US $11,180,000 for determining the amount of the unified credit against estate tax. The Annual Gift Tax Exclusion for Gifts to Noncitizen Spouse for 2018 is US $152,000 and the Annual Gift Tax Exclusion for 2018 is US $15,000. Individuals who are aware of these figures may seek to take advantage of their situation by engaging in certain gifting to reduce their net worth. Furthermore, individuals must be aware of these figures as there are certain gift tax filing requirements when U.S. citizens gift funds above the exclusion amount or if spouses intend to split gifts under the exclusion amount. Individuals who receive gifts from trusts, estates, partnerships or corporations themselves may be required to file with the IRS.

Furthermore, if you are the grantor, beneficiary, trustee of a trust or executor of an estate, there are certain requirements that must be met to avoid costly tax consequences on the U.S. side. Our team of professionals can assist in estate planning to avoid any costly mistakes and can also evaluate existing estate plans to ensure that you are onside with the U.S. gift and estate tax rules.

Passive Foreign Investment Company and Compliance Planning

Many Canadian tax and investment planners have a variety of tax efficient structures that are amazingly advantageous for Canadian citizens to take advantage of to help grow their investments or expand their business. Often times these planners are unaware of the tax consequences this imparts on U.S. citizens or Green Card holders or are unaware that you, their client, has a U.S. presence. This can lead to a whole host of issues and compliance problems for you and your investment.

Passive Foreign Investment Companies (PFICs) require special handling when a U.S. citizen is involved. U.S. shareholders can elect different methods of being taxed by the United States or subject themselves to default tax treatment of PFICs. Understanding your situation and creating a plan to be taxed will help ensure that the taxpayer is aware of all avenues available to them and that you are able to maintain compliance with U.S. tax laws and not subject yourself to harsh penalties by the IRS for incorrect reporting.

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