Cross Border Taxation

Know Your Taxes Well, Wherever You Are

US Tax for Canadians

Are you required to file a US tax return?

The cross-border movement of professionals and other Canadian business persons may trigger the filing of U.S. Tax return including disclosure of income in both the countries.

Under the United States–Mexico–Canada Agreement(USMCA), certain Canadian Professionals may enter the United States and Mexico to carry out the professional and/or business activities for an employer on a contract and temporary basis.

Correctly determine your tax status in the U.S. if you are a U.S. citizen, resident or non-resident alien. For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as non-resident aliens and resident aliens.

You are a resident alien of the U.S. for tax purposes if you meet either the green card test or the substantial presence test for the calendar year.

Resident aliens (including Green Card holders) generally are taxed on their worldwide income, the same way as U.S. Citizens. In some cases, aliens can make elections which override the green card test and the substantial presence test.

Non-resident aliens are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States.

If you fall in one of the following categories – then we can assist you with your U.S. taxes.

Our current services, offered to both Canadian and U.S. residents and non-residents (including corporate entities), include tax preparation, tax planning and tax opinions (written or verbal), structuring of transactions and operations, as well as representation before tax authorities.

As a resident of Canada, one may have to file a U.S. income tax return in certain circumstances. Common reasons that would trigger a U.S. tax filing requirement include:

Income in the U.S

Snowbirds

If you spend part of the year in the United States (U.S.), for example, for health reasons or on vacation, and you maintain residential ties in Canada (that is, a home, a spouse or common-law partner, a property), CRA usually considers you to be a factual resident of Canada.

As a factual resident of Canada, CRA would tax your income as if you never left Canada. You should continue to file your Canadian tax returns.

You may also be required to file U.S. federal income tax returns. That’s because, under U.S. law, you may be considered a U.S. resident as well as a resident of Canada. Rules exist for filing a closer connection exception statement for aliens. This statement is filed in Form 8840 with IRS even if you have no income from U.S. sources.

This all means that you might be considered a resident of both Canada and the U.S. under each country’s domestic tax laws.

U.S. Citizens / Green Card holder

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

You are considered a U.S. resident if you hold a green card or if you meet the “substantial presence” test.

Reporting by U.S. Taxpayers Holding Foreign Financial Assets

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. Contact us to see if you have to report information about foreign financial assets and accounts.

Tax Planning and Preparation for Individuals

We can address tax concerns that may include, taxation (and/or tax reporting) of employment income, and reporting of investment income (e.g. capital gains, property income, etc.) in Canada and/or the United States. We prepare Canadian, U.S. tax returns for U.S. citizens and green-card holders residing in Canada and others who are required to file U.S. income tax returns. We can also assist with tax planning in this area.

If you do not have any income other than your employment or professional services income, you may exclude that from your income as Foreign Earned Income Exclusion (Form 2555, U.S tax laws). Depending on one’s particular situation, we may advise on that mechanism.

Withholding of Tax

Generally, a foreign person is subject to U.S tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to tax of 30% (Non Resident Alien withholding). A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person’s country of residence and the United States.

You may also qualify for a reduced rate of withholding taxes if you claim that the income is effectively connected with the conduct of a trade or business in the United States.

Canada-US Tax Treaty

This tax convention is a safeguard against double taxation. Both Canada and United States have such tax treaties with many countries.

Taxpayer Identification Number

Each taxpayer who files, or is claimed as a dependent on a U.S. tax return will need a social security number (SSN) or individual taxpayer identification number (ITIN).

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS). The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security number (SSN) from the Social Security Administration (SSA).

If you are non resident alien you can obtain an ITIN by filing Form W7

along with appropriate documentation.

As an IRS registered Certifying Acceptance agent (CAA) we can help you obtain the ITIN and also complete the necessary formalities.

Automatic Exchange of Information

The new global standard on Automatic Exchange of Information (AEOI) reduces the possibility for tax evasion. It provides for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence.

Its purpose is to combat tax evasion. The idea was based on the U.S. Foreign Account Tax Compliance Act (FATCA) implementation agreements and its legal basis is the Convention on Mutual Administrative Assistance in Tax Matters.

It will enable governments to recover tax revenue lost to non-compliant taxpayers, and will further strengthen international efforts to increase transparency, cooperation, and accountability among financial institutions and tax administrations.

Where legal relationships have been established, the CRA will send financial account information concerning non-residents of Canada to their resident tax authorities. In the reverse, the CRA will receive financial account information concerning residents of Canada holding financial accounts from those foreign tax authorities.

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SERVICES FOR NRIs AND PIOs

Taxation Services

Residents are subject to Indian tax on their worldwide income, including capital gains. Every individual is treated as a separate taxpayer and no options exist for filing of joint husband and wife returns unlike in the U.S and Canada.

Non-Residents are subject to Indian tax on their Indian source income and income received or deemed to be received in India or deemed to be accruing or arising in India. Interest and any other sum chargeable to tax paid to non-residents are subject to withholding tax at fixed rates.

The Indian tax year runs from April 1st each year to March 31st of the following year, and is referred to as the previous year. The assessment year relevant to the previous year commences on April 1st immediately following the end of the previous year.

A challenge could exist for a person, say for example, a resident of Canada having income from Indian sources. We can help in dealing with these challenges.

Filing of Return of Income

We can provide the appropriate advice on whether you should file your tax return in India or not. This is important because if you file the return, you will actually get a refund, which you have already paid by means of Tax Deduction at Source (TDS).

We can help provide expert guidance in filing of returns.

PAN

Every taxpayer is allocated on application a unique identifying number called a Permanent Account Number (PAN). All taxpayers, including non-residents must apply for PAN if their taxable income exceeds the maximum amount not chargeable to tax.

We can help you file this.