US citizen with Canadian husband and S Corporation moves to Canada - Dan Walkow US Canadian Investment specialist -
Small amendment to the original
XXXXX XXXXXXXXX wrote:
I just sent an e-mail and realized that I didn't include my phone
number, if needed. Here it is:
We are located in XXXXXXXX, BC.
On 5/14/09, XXXXXXX XXXXXXXXXX wrote:
I found your website when I was looking for an accountant that
specializes in US/Canada tax issues. I was wondering if you were
accepting any new clients.
To give you a bit of background, my husband is a Canadian citizen,
returned as a permanent resident as of the 1/1/08. I am a US citizen
and became a Canadian permanent resident as of 10/14/2008. The
majority of our income is US from an S corp, some as payroll some as
pass through. My husband has some self employment income here in
Canada (around 10K). We filed our US taxes (2008) as full time
residents of the US. I prepared them (we didn't have an accountant).
We have a permanent address in the US that we use and a sailboat we
live on when we are there. We have not filed our Canadian taxes yet
and definitely need some assistance in that. If you are unable to help
us could you forward on a name or number of someone that you think
david ingram replies:
I do specialize in US / Canadian Income tax matters but do not usually accept
people with US corporations. Strangely enough, the last one I did accept was
from the same BC town you are in. It must be full of Americans.
If yours is a one person or one family S corp, I generally will.
I hope that you reported the $10,000 earned in Canada on a schedule C
on your US 1040, but you really could not finish your US return without
doing Canada first.
And although you only got your landed status in October, I assume that you were
here (in Canada) with your husband most of the time. If that is so, YOU are also a taxable
resident of Canada because of the number of days you were here.
I do not see your husband's present status - Does he have a green card or
is he a US citizen as well.
AND, be advised that when you live in
Canada, your US corporation becomes a Canadian Corporation and needs to file a
Canadian T2 return as well. (In reverse, a Canadian Company would be
filing an 1120F to the IRS)
You must also pay particular attention
to questions 7 and 8 at the bottom of Schedule B of your US 1040.
have had more than $10,000 US total (combined) in any Canadian financial
institution in 2008, the answer to question 7 is YES. If your husband has
an RRSP, the answer to question 8 is YES. If he has an RRSP with $12,000
and you ever had $1,000 more in the bank in Canada the answers to 7 and 8 are
And, even if you do not think you had $10,000 or more in the bank,
if you bought a house in Nelson in 2008, you certainly had more than $10,000 in
a Canadian account even if it just scooted through the bank in 2
My past eperience tells me
that you will be amending the 1040 you filed.
This older question will give you a
better idea of how it works.
You would likely be wise to have me involved
in your taxes. I have also attached a price guideline after the following
I have lived in the
US for 17 years, originally
with a green card, and became a US citizen last year. I have
not filed a Canadian tax return since approx 1992. I had an RRSP in
Canada which I switched to an
investment company in Alberta – partially into mutual funds and
partially into an RSP. I received a T3 – do I need to file a Canadian Tax
return? If yes, what would be my first step after being away so many
You do not need to file a tax return but you do need to
pay the CRA 10% on any interest you received under Art XI of the Tax Treaty and
15% on any actual dividends you received under Article X.
I can bet that
you have lived in the US for 17 years and never reported your Internal earnings
on the RRSP to the US on your schedule B. If you look at the instructions
for schedule B now, you will see that you have to fill it in if you have any
foreign accounts. An RRSP is both a foreign account (question 7) and more
importantly a foreign trust (question 8). Assuming you had / have more
than $10,000 total in your foreign account(s),failure to fill in schedule B and
answer "yes" and fill in the required T DF 90-22.1 (any account, not just
an RRSP) carries a minimum penalty of $10,000 and a maximum of
$500,000 PLUS up to 5 years in jail.
If your foreign account
(or one of them) happens to be a Canadian RRSP, failure to file from 3520 or the
new substitute 8891 carries a fine or penalty of 35% of the amount in the RRSP
PLUS 5% per year that it was not reported.
The good news is that although
I know of over 1,000 $10,000 fines for failure to file the TDF-90 forms, I
have never seen anyone fined who came forward voluntarily and filed six years of
back forms. Same thing for the 8891.
What I think you have done now
is taken out $5,000 or $10,000 out of your RRSP using a Canadian address so that
they only withheld 10% tax because some financial advisor or friend has told you
to do that. They have then set you up with a Canadian Mutual fund which
unless they are one of about ten qualified people in Canada, they are not
legally allowed to deal with you because you are a US resident.
should not have received a T3 slip. It means that you are not being shown
as a non-resident of Canada and are using a Canadian address for your
account. As a non-resident of Canada you owe 15% tax on any dividends
received and 10% tax on any interest received. You may want to keep the
Canadian address because you have been told that your broker or Canadian
financial representative can not deal with you if you are a non-resident and
that is correct. If you are involved in a wink, wink, nudge, nudge kind of
deal, your financial person is risking their own securities licence and that of
their company. In addition, the US Securities Commission can fine them for
selling to someone in the US without a US Securities licence.
the meantime, you owe Canada another 15% tax on the withdrawal (deregistration)
from the RRSP and have to do a rather complicated calculation to decide how much
of the withdrawal is taxable on your US return.
Get it fixed, you
(and your husband Axxxxx?) are subject to massive US fines if my assumption is
correct and I am 99% sure i am correct based upon your question.
do it for you if required.
PS and tongue in cheek for sure but if your
financial person in Alberta knows you are living in the US and is still dealing
with you in this situation, he or she should be reported to their company
and fired or re-qualified or something serious. If he or she knew that you
are living in the US and did not tell you that you had these specific US
reporting rules, they should just be shot and put out of their misery
because they have left you exposed to big fines and penalties. I think,
that by now, every financial organization has made sure that their personnel
understand these rules.
The record I saw was a 105 year old lady in the
Lynn Valley nursing Home with a $10,000 fine for not reporting a Royal Bank of
Canada account on form TDF 90-22.1.
This older question will help you
a bit as well
We have watched the Cdn$ rise against the US$ and
now wonder what the impact is if we cash in the RRSP's and bring the cash back
to the USA. It seems that the exchange rate would offset the tax impacts
9presuming of course that the exchange rate is temporarily
Logically there is Cdn penalty withholding and then the cash would
be taxed at non resident rates. Can we cash in smaller amounts to get
In the US what would
I am one of the people that thinks the
Canadian Dollar will be worth $1.20 US. However, I have been wrong before
and will be wrong again. However, you might want to hedge your bets and
just transfer 50% and be happy you did not do it three years
A non-resident of Canada owes the Canadian government 25%
withholding tax when he or she withdraws an RRSP as a non-resident.
principal part of the RRSP is not taxable in the US.
The total withdrawal
(including the tax deducted) goes on line 15a and the taxable portion goes on
line 15b on put zero on 15b and put the actual growth on schedules B and D if
you know what the interest, dividends and capital gains portions of the increase
are. The increase in exchange will go on Schedule D for
The taxable portion is the increase in value since the day you
crossed the border to the US and will be the part you have been reporting and
exempting every year on form 8891 and the previous reporting you did under 89-45
and 2003-57, etc., etc.
Any tax paid to Canada will be deductible as a
foreign tax credit on US form 1116 on a pro-rata basis.
also, of course been reporting the existence of the RRSP on form TDF
90-22.1 - the hint about these two forms are the two questions at
the bottom of schedule B. The 8891 is a new simpler form for the last three
years and takes the place of the draconian 3520 mentioned in the bottom
This older Q & A will help you I
I am a Canadian citizen and legal US resident. I've lived in Florida
for 25 years and now, at 65, I'm considering taking distributions from a spousal
RRSP with Royal Bank.
Unfortunately, income tax information I've received from different
sources is terribly conflicting and, at worst, indicates that my nest egg will
be gobbled up by governments. Is this something you can steer me straight
If you roll the RRSP into an RRIF (Registered retirement
investment Fund), The payer will have to deduct 15% non resident withholding tax
under the terms of Article XVIII of the US . Canada Income Tax Convention
You will then report it again on form 8891 of your 1040 and
there may or may not be US tax to pay. If your income is high enough that
you are in a federal 28% tax rate, there 'will' be tax to pay on the RRIF.
You will claim the 15% tax paid to Canada on US form
Now, you have been supposed
to report the existence of that account to the Department of the Treasury
in Detroit on form TDF 90-22.1 since 1989 when that law was passed and shown in
bulletin 89-45. Failure to report can be a penalty of a minimum of $10,000
to a maximum of $500,000 PLUS up to 5 years in jail for each year you did not
report it. See the bottom question on schedule B of your 1040 where your
foreign trust requires the preparing and filing of a 3520.
you do NOT have to do a 3520. the 8891 takes it place and is much
The penalty for not also reporting the RRSP and its internal
earnings to the IRS (it was the Dept of Treasury above) is 35% of
the principal plus 5% for each year it was not reported since 1989 when the
reporting rules started. The form 8891 is an exemption for paying the tax
on those internal earnings.
See form 8891 at: http://www.irs.gov/pub/irs-pdf/f8891.pdf
I know of over 1,000 people who have paid $10,000 fines for not filing form TDF
90-22.1, I (at this time) do not know personally of a single individual who has
been fined under the 8891 / 3520 rules. I also have NEVER seen a person
fined for filing the TDF 90-22.1 forms late and voluntarily.
opinion, you should file the TDF 90-22.1 forms retroactively for six years.to
the Department of the Treasury.
See Form TDF 90-22.1 at http://www.irs.gov/pub/irs-pdf/f90221.pdf
Note the penalty of up to $500,000 plus five years in jail for
failure to file. The minimum fine is now $10,000.
file retroactive 8891 forms with a 1040X to the IRS for the same years.
Note that you are the BENEFICIARY so follow the Beneficiary rules. The
8891 form is actually only 3 years old. Before that, you just wrote out
the information on a free form page but it is a convenient form to use
Hope this helps and we would be glad to assist if
Regarding the quality of your advisor -- the following
explains the licensing problem.
I am a US Citizen and Landed Immigrant of Canada. Do I have
any legal or other restrictions for buying, selling, trading
stocks, bonds, mutual funds, or having a broker on both sides of the border
doing the same for me. I am getting mixed information from brokers on
both sides and NEED an experts advice.
The restriction is NOT on you by government.
restriction is on the people you are dealing with. They are restricted by
the Securities Commissions and their licensing as to whom 'they' can sell
In other words, if you live in BC, an Ontario Securities broker or
Mutual Fund salesman can NOT deal with you.
Some like Fred Snyder are
licenced in BC and Ontario and can deal with you but even two provinces is
When you are talking about BC - Arizona, or Ontario -
Florida, you have a real problem.
The following older answers will likely
help - Dan Walkow and Darrell Thompson HAVE gone to the effort to be able to
deal with cross-border situations.
QUESTION: 1. have been trying to find ethical investment firm to go
with in Canada and can not seem to get any unbiased answers We live in Red
Lake Ontario (landed immigrants), but are also US citizens
2. Is this
Stansberry & Associates legit, as they seem to have many different
opportunities claiming great returns
Pinchot Retirement Plan, Master
Limited Partnership, Market Index Target Term Security , Oakmark Select
Thanks greatly looking forward to your
I have no good or bad knowledge about Stansbery and
Associates. None of my clients deal with them to my knowledge.
looking at their website, they seem to be a newsletter operation as mucyh as
anything. I have about 15 interviews with newsletter writers on gold
(John Embry), oil, uranium (Martin Kafusa), silver (Sean Rahkimov) real estate
(Ozzie Jurock), futures and commodities (Victor Adai), Resources in General
(Elsworth Dickson, Publisher of Resource World) etc at www.howestreet.com
- mostly in the third
Two ethical people who specialize in
selling securities, RRSPs, etc., to US citizens in Canada or Canadians in the
Local (604) 541-9952
LD (866) 775-7704
individuals and their companies have gone to the effort to get themselves
registered just about everywhere so they can deal with a Canadian in Florida or
California or Nevada, or Hawaii,
Note that because of their
specialty, they tend to deal with accounts in excess of $200,000
both parties would welcome an exploratory call.
SUGGESTED PRICE GUIDELINES - Aug 5,
david ingram's US / Canada Services
Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada
Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N
Cell (604) 657-8451 -
980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week
Vancouver (LA) time - (please do not fax or phone
outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income
Tax service help.
pert US Canada Canadian American
Mexican Income Tax service and
David Ingram gives expert income
tax service & immigration help to non-resident Americans &
Canadians from New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
consultations are $450 for 15 minutes to 50 minutes (professional hour). Please
note that GST is added if product remains in Canada or is to be returned to
Canada or a phone consultation is in Canada. ($472.50 with GST for in person or
if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income
Tax service and help.
This is not intended to be definitive but in
general I am quoting $900 to $3,000 for a dual country tax
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two
$3,000 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
We will still prepare
Canadian only (lives in Canada, no US connection period) with two or
three slips and no capital gains, etc. for $200.00 up.
However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms,
expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or
T5008 or T101 --- Income trusts with amounts in box 42 are an even larger
problem and will be more expensive. - i.e. 20
information slips will be at least $350.00
With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
A Business for $400 - Rental and business likely
$550 to $700
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
18 RRSPs would be $900.00 - (maybe amalgamate a
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the
Canadian return as a guide for seven years at a time will be from $150 to
$600.00 per year depending upon numbers of bank accounts, RRSP's, existence of
rental houses, self employment, etc. Note that these returns tend to be
informational rather than taxable. In fact, if there are children
involved, we usually get refunds of $1,000 per child per year for 3 years.
We have done several catch-ups where the client has received as much as $6,000
back for an $1,800 bill and one recently with 6 children is resulting in over
Email and Faxed information is convenient for the
sender but very time consuming and hard to keep track of when they come in
multiple files. As of May 1, 2008, we will charge or be charging a
surcharge for information that comes in more than two files. It can take
us a valuable hour or more to try and put together the file when someone
sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and
emails for instance.
This is a guideline not etched
in stone. If you do your own TDF-90 forms, it
is to your advantage. However, if we put them in the first year, the computer
carries them forward beautifully.
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