Complications concerning US and Canadian Tax Laws

The Canada and United States each has very distinctive systems of taxation. The rules on cross-border taxation between the two nations are covered in Article XXIV of the US – Canada Income Tax Convention, 1980 (Treaty). Both countries sign the Tax Treaty. This treaty ensure residents of the two countries not taxed on the same income in the same year. Filing US taxes in Canada is no easy task. Residents from both countries are faced with challenges determining the US and Canadian tax laws.

Cross Border Tax Services
Cross Border Tax Services
  • Tax obligations

The US Foreign Account Tax Compliance (FATCA) became Canadian Law, has become part of the 2014 federal budget. FATCA requires Canadian financial establishments to send information of their US account holders to the Canada Revenue Agency, will send the data to the Internal Revenue Services (IRS). Overdue tax returns should be a priority to avoid penalties and the IRS chasing you.

  • Dual Citizenship and Taxes
The CRA reviews information on your residential ties to Canada. Canada Revenue Agency (CRA) have guidelines and interpretations on the subject, your place of residency, length of stay in Canada and a number of other factors to make its summary. Based on that result, you could be taxed or not. Obligations of Canadian taxation are based on residency status.
If you are a citizen of another country problems usually arise, like the U.S., and classified as a Canadian resident or with dual Canadian citizenship. Regardless of their country of residency they are taxed based on their worldwide income.  Residents of both countries get provisions and relief because of the tax treaty, so they pay in one country and receive credit in the other for the taxes paid.
  • Investments

Investments are tax-free that grow within their accounts. Many Canadian residents have been investing in Registered Education Saving Plans (RESPs) and Tax Free Savings Account (TFSAs). These investments can be costly for U.S. tax purposes and do not provide the tax benefits under U.S. tax rules that do under Canadian tax rules. They do not get special treatment under U.S. domestic tax law or under the Canada – U.S. Income Tax Convention, which is why, the income generated by these accounts is taxable to the investor.

Another complication is that IRS considers RESPs to be foreign trusts, which means individuals must need to file IRS Forms 3520 and 3520A on an annual basis. Foreign trusts returns are complicated to prepare and compliance to these can become very costly.

For those with financial circumstances like filing taxes in Canada, there are quite a number of distinguished cross-border tax team who specializes in these scenarios. Paying US taxes in Canada, despite complications, can be very beneficial. It actually guarantee you a good record of paying your taxes. US taxes in Canada, in addition, are protected by the rules of the treaty so it doesn’t have to be too difficult.


4 Things a Cross Border Tax Specialist can assist on your Tax Services

Filing taxes requires patience and commitment due to itschallenging process.Most businesses and people working abroad would like to appoint the task to someone who’s expert or a specialist in filing cross border taxes between US and Canada.

Listed below are the few ways on how a Cross Border tax Specialist can help you with your Cross Border Taxes:

aptaxgroup - Tax problems with your inheritance

  • Provide you with greatly required ability. Cross Border Tax is complicated and it can be exceptionally difficult to somebody who is not familiar with the laws involving US and Canadian people, organizations, estates or corporations. A Cross Border Tax Specialist will give you the highly required mastery on cross border tax issues.
  • Monitor the Change of tax laws. Tax laws are changing and whether you’re an individual working across US and Canada borders or a Canadian entrepreneur putting resources in the US or the other way around, it’s difficult to monitor the changing of laws and its requirement on top of everything else that you have to manage on regular basis. A Cross Border Tax Specialist will keep track of these changes for you and update you as necessary.
  • Give 100% of their Time and Training on Cross Border Tax. Provide you full time assistance with the obligations of arranging and preparing all the needed requirements for your tax responsibility. A cross border tax specialist dedicates their time in studying preparing on cross border tax services which means you can be confident that your taxes are being handled by a person who knows and understands the procedure.
  • Maximize tax benefits. There are always a true variety of taxes benefits open to employees and companies when fees are done regularly. But, when you need to do all your tax preparations and obligations, paying taxes on time is a matter task management. A cross border tax specialist is the person that concentrates on the filing task.

Processing and planning fees can be challenging – even difficult, for a few – but this doesn’t have to be a burden for you. With Cross Border Tax Services, an elaborate and stressful tax-filing process is somethingyou can experience. You can give attention to doing your work or managing your investments and business, while a Cross border Tax Specialist dedicates their commitment to deal with this process for you.

Things You need to Know about Taxes

The United States and Canada have a close economic and cultural ties due to proximity. It’s not surprising that citizens from both countries move to each other’s country to invest, study, conduct business, work or to retire. Both countries, the U.S. and Canada, have very unique system in taxation. Thus, they agreed on the US-Canada Tax Convention signed in 1980 or more commonly called as the Tax Treaty.

Cross Border Tax Specialist
Cross Border Tax Specialist

The Tax Treaty covers the foreign tax credits which are available in scenarios where each nation claims a right to tax the same income. Cross-border tax Canada-US, through the specific tax laws carried by the Tax Treaty, protects individuals from double taxation. Moreover, cross-border tax Canada-US navigates through tax requirements for both Canadian and US interest, earning and holdings. US taxes in Canada include personal and business taxes, income from sale of properties and estate taxes and rental income. All these require expert handling to ensure legal taxes are paid and penalties are avoided.

Apart from avoiding “double taxation”, the Tax Treaty and other amending protocols also enhances copper ration between the two countries. The 5th protocol to the Tax Treaty was designed to remove source-country “withholding” tax on cross-border interest payments. Carla Pehowski, senior tax counsel, U.S. Taxation, RBC, notes that, “The big benefit of eliminating withholding tax on cross-border interest payments is that cross-border businesses will have more flexibility in choosing and working with their bankers” She further adds, “Any attempt to centralize all lending in Canada would trigger a request by the bank for reimbursement of withholding tax on any interest due from the U.S. borrower. There’s a whole layer of complexity and potential expense that will disappear in the future cross-border loans.” The 5th Protocol also includes allowing taxpayers arbitration to otherwise insolvable double tax issues and ensuring that immigrant gains do not have double taxation.

In addition, here are a few things you need to know about taxes:

  1. Know which cross border forms you need to file to the Internal Revenue Service (IRS). US taxes in Canada is linked to the IRS through the Canada Revenue Agency (CRA). Errors in preparing these returns can result in penalties, tax costs and interest payments.
  2. Deadlines are important. Taxpayers who live abroad have different deadlines than U.S. Citizen living in the U.S. If you don’t meet these deadline, it can be quite costly.
  3. Make sure you have a competent cross border tax specialist.

Reasons why a Business Accountant is Significant

Moving overseas, taxation is a burden that most people find overwhelming. You need to have the knowledge and skills to understand the cross border tax services if coming from Canada or U.S. Canada and U.S. due to proximity have seen a quite a number of their residents moving from one country to the other. This resulted to the Tax Treaty or the Canada-US Tax Convention. The Tax Treaty protects citizens from both countries from double taxation. The Tax Treaty makes it possible for Canadian companies, for example, to do business in the U.S. and be prevented from double taxation that might otherwise arise due to their U.S. tax exposure. A cross border tax specialist handles this kind of cases.

Cross border tax Canada-US would also benefit from business accountants who are experts on the subject. A cross border tax specialist generally use the services of a business accountant to identify the correct tax payments you need to secure. A business accountant provides a comprehensive solution that simplifies financial reporting, accounting and operational issues to meet all international legal and operational requirements and taxes. Cross border tax Canada-US, in particular, has their own legal requirements that need to be addressed. A business accountant can be a viable asset in compiling the financial responsibilities that go with cross border tax Canada-US through a cross border specialist.

Here are a few reasons why a business accountant is important:

Filing US Taxes From Canada
Filing US Taxes From Canada
  1. U.S. companies rely on a business accountant to run their business affairs. Business accountants use accounting solutions to provide these companies partial accounting control of the operation.
  2. A business accountant supports in the decision making process of the company to prevent costing valuable time, money and additional tax penalties and audits.
  3. There is a critical need to have a complete business solution that covers all accounting and tax needs. A business accountant provides a full and comprehensive understanding of operational and reporting requirements that is fully compliant with the international business tax laws.
  4. A business accountant meets all financial, accounting and operational requirements of a company with current IT solutions. A company without an international and integrated solution can lead to audits, penalties, and costly bureaucratic and legal migraines. A business accountant keeps you away from these crises.
  5. Meeting all financial and international tax obligations, a business accountant operates as a comprehensive and integrated tool to control critical operations of the company, such as: sales orders, purchase orders, accounts payable, receivables, shipments, and inventory and warehouse management.

Because of the increasing cross-border business ventures, particularly in Canada by a U.S. company or vice versa, security regulators around the world ensure that high quality, comprehensive information is available to investors in all markets. To access capital markets in different countries, one must comply with the requirements of each country, which differ in many respects. That is why gaining the service of a business accountant and a cross-border tax specialist is not only important but also very valuable.

Your Guide to Filing US Taxes in Canada

Filing US Taxes From Canada

Most countries in the world impose taxes only to citizens who are residents of the said country. Once the person leaves the country and work somewhere else, he or she is automatically exempted from paying taxes or even declaring their worldwide income to that country. Continue reading

Tax problems with your inheritance

aptaxgroup - Tax problems with your inheritance
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When someone passes away, it’s unfortunately common for their estate to include some messy tax problems. Unless the individual or their family is on the ball and has been taking proper care of their taxes, they might be leaving behind quite a headache.

There are a few common scenarios where family members are left to deal with tax chaos after their loved one has passed away. Most of the time, the issue is a result of a lack of tax knowledge and can be completely avoided. Some of these tax problems exist due to:

  1. Unpaid taxes– If someone has experienced a long illness before their death, they may have been neglecting their taxes for multiple years. The estate’s executor will be responsible for completing the required forms and making sure that the deceased’s taxes are up-to-date.
  2. Hidden funds or assets– While it sounds like a pleasant surprise to discover that a relative had an overseas bank account you didn’t know about, you might be less than enthused to learn that they had also been neglecting to share that information with the IRS or CRA and they owe taxes on that money.

No one enjoys talking with loved ones about a time when they are no longer around, but making sure that their (and your) taxes are in order can make a considerable difference in the future.

The first step is to ensure that you and your loved ones have an accountant you trust to help you navigate your current tax situation. Your accountant should also know about your plans in case of death. He/she will be able to give you information about the taxes your loved ones will have to pay on their inheritance and will help you to understand exactly what you’re leaving behind.

The Chicago Tribune recently posted about potential tax problems with an inheritance and looked to Douglas Rothermich, vice president of wealth planning strategies at TIIAA-CRF for his perspective. “Most families don’t want to let assets blow up their kids financially or create a wedge within the family,” he said. “It’s really important that older people planning their affairs think it through ahead of time so their loved ones don’t inherit a tax mess.”


Back to School Tax Credits

Graceful female student
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As the leaves start to fall and students start to dread the approaching school year, life gets inescapably busy. The summer always seems to fly by and when September hits, parents of post-secondary students find themselves frantically moving their kids into dorms and shelling out cash for textbooks. With all of this chaos, many people forget to keep track of some important receipts and come tax time, they lose out on some great school tax credits and tax deductions.

Post-secondary students can claim their tuition fees to receive a tuition tax credit and need either an official tax receipt or a completed form T2202A to do so. This tax credit is fairly straightforward and is commonly transferred to a student’s parents if their income isn’t very high or if the parents are the ones footing the educational bill.

Note: If there are any student loans involved, you might want to become familiar with the rules for claiming interest paid on student loans for after the schooling is finished.

Paying to take an exam or to receive a license in order to practice a certain profession or trade in Canada might be eligible for the tuition tax credit as well. There are some exceptions if you are being reimbursed by an employer, so make sure to check with your accountant before you file your tax return.

If a student has to move in order to go to school (at least 40 km closer than their previous home), they can claim their moving expenses. Unfortunately, claiming moving expenses for school isn’t exactly as helpful as it is for work. A student can only deduct their moving expenses from the money they receive as a result of attending school and would have to claim as income.

In other words, if a student receives a bursary or a research grant and has to move to another location to complete their educational commitment, they can deduct their moving expenses from that income.

Even though textbooks range in price dramatically from faculty to faculty, the CRA handles textbook tax deductions in a one-size-fits-all approach. You can claim $65 per month for full-time studies and $20 for part-time. Your accountant will use your Schedule 11 to figure out exactly how much you can claim.

Make sure to keep all of these school tax credits and deductions in mind as the weather cools and the semester starts up. You will reap the benefits at tax time!