Are you looking for an international tax accountant to help with US - Canada or Canada - US tax preparation?
A. A. Ali, CA specializes in Canadian and American cross-border taxation. As a cross border tax accounting firm, we bring over 20 years of international tax expertise to our clients in Canada and the U.S. With offices in Toronto and Florida, we are ideally poised to help clients on either side of the border, and are licensed to represent you in all states and provinces.
Taxation – Canada
Every business or investment decision has tax implications. We strive to minimize your tax burden through effective planning. We provide a variety of tax services designed to achieve this objective. This includes corporate, trust and personal.
Business owners need information that allows them to make decisions
quickly. Our goal is to ensure that accurate, relevant information is
available to our clients so that they make the right decisions.
The Canadian Income Tax Act uses residency status (not citizenship) to determine how the income should be taxed in Canada.
Subsection 2(1) of the Income Tax Act states, “An Income Tax shall be paid… on the taxable income for each taxation year of every person resident in Canada at any time in the year.”
Canadian residents are taxed on their world income. While other countries may tax income on the basis of citizenship or domicile, the principal basis upon which the Income Tax Act of Canada imposes liability for income tax is residency.
CONSULT one of our professional and we will sort this out for you to make sure you are in compliance with the law.
If the individual
is a dual citizen or not a citizen of either country, then CRA could be asked
to determine the status of the individual. This could be done using the form
“Determination of Residency Status” – NR74 E.
Example : Rose is a U.S. citizen. she signed a five-year employment contract with Zellers. She moved to Canada on June 15th. She has a valid work permit for five years. She has intention to apply for Canadian immigration. She is single. She lives in a rented apartment in Etobicoke. She owns an apartment in Orlando Florida that is still available for her own use. How should she file her taxes? Can she claim moving expenses?
Answer: In order to determine whether Rose is a Canadian resident, the following factors need to be considered:
- Physical Presence: Rose is present in Canada as of June 15th. However determination of residency requires more than physical presence. She is living in a rented apartment in Etobicoke. Even though she still has a home available for use in Orlando, she has been staying in Etobicoke since her arrival.
- Habitual Abode: She has been constantly present in Canada for work since June 15th . Her business interests have been in Etobicoke since June 15th.
- Social Connections: She goes to Church every weekend and socializes well with friends that she has made here. She also has some cousins whom she visits regularly. She doesn’t have much contact with any of her previous friends in Orlando.
- Nationality: Her being U.S. citizen is only a determinative factor if nothing else proves her residency. But based on the above-mentioned information, we don’t need to go that far. Her Canadian residency can be proved based on other factors.
Implications of Canadian residency
- She took Canadian residency as of June 15th. She would be part year resident.
- She has to declare her worldwide income starting June 15th.
- Her non-refundable credits will be prorated based on number of days in Canada.
- Rose can’t claim moving expense since she was non-resident before the move.
- Rose also has to file US tax return since she is US citizen.
Taxation - US
US tax rules also extend beyond US citizens to those foreign persons carrying on business in the US or holding US investments in real estate or stock of US corporations. Many Non US persons are subject to US gift tax on certain real estate transactions and also subject to US death taxes on US property. In line with this we have seasoned staff (CPA’s) in dealing with these issues. We prepare all forms of US Tax Returns including application for ITIN.
- File your return on time every year.
- Double check your math. Don't make mistakes. The best way to accomplish this is to...
- Buy a computer program. These days, it doesn't make sense to do it by hand, unless you have the simplest of returns. A good program will notify you of errors, keep you up to date on recent tax changes, and even point out deductions you may be missing. If you don't have a computer, hire a professional.
- Declare all your income, especially if you are self-employed.
- Don't make up deductions, especially if you are self-employed. Be honest. Revenue Canada has ways of computer cross-checking your claims.
- Don't e-file. OK, I have no facts or statistics to back this up, but my impression from talking to people inside the industry is that taxpayers who e-file are more likely to be audited. It seems logical. Have you ever prepared your own return, then taken it to an e-filer? Often they barely glance at the documents before sending the return off. These returns must have a high percentage of errors, and I'm sure Revenue Canada knows this and watches them carefully.
- I know this is a hard pill to swallow, but earn less money. The more you make the greater the chance of an audit (you just pay more taxes anyway).
- Don't declare business losses year after year. Losses are OK for 2-3 years
- Filing a guilty looking return will increase your chance of an audit. For example, if you have a large meal and entertainment deduction, it must be backed up with adequate documentation.
- Keep accurate records