Sent: Sunday, September 17, 2006 5:23 PM To: taxman at centa.com Subject: Canadian and US taxes Hi David, Currently,I have separate Canadian and US accountants. As you can imagine, what is benficial for one country is negative for the other:), and I'm billed twice. I live in Vancouver, and wonder if you could give me an estimate for doing both returns for 2006. I am a dual citizen, own property in Vancouver and California(one personal and one rental) in each country. Currently I plan to spend 7 months in Vancouver and 5 in California. My Canadian accountant has set up a numbered LLC for me. I've been told it is an advantage in Canada, and could be problematic in the US. Also, would it be better for me taxwise to establish residency in the US only? I would appreciate an estmate for you doing both returns,including California State taxes. Thanks, ------------------------------------------ david ingram replies: After 43 years of US / Canada Tax preparation, I am convinced that one should only use someone who is well versed in both countries to do both the US and Canadian taxes at the same time. That way, one does not buy an RRSP which not only does not work for the US but is a negative or an IRA or 401(K) which is a negative in Canada. Rental real estate is another commodity which is actually treated differently by the US and Canadian Federal governments and the state of California. What happens in one place is usually not recognized by the other government. I can't imagine why you would have set up an LLC in Canada. It triples the complications for your US return because it requires the preparation of US forms 5471 which we usually charge $1,400 for by itself. The penalty for NOT filling out form 5471 is $10,000 for the first 90 days and $10,000 every 30 days thereafter to a maximum of $50,000 per shareholder per year. You also have to fill in form TDF-90 for all of your Canadian Accounts and form 8891 if you have a Canadian RRSP. (one for each account). I would undoubtedly recommend the dropping of the Canadian LLC. The only advantage is likely that it makes the accountant and lawyer who set it up more money. As an example, if I told 100 of my clients to incorporate, it would increase my gross income by $200,000 per year and make the lawyer(s) I sent them to very happy as well. The Instructions for form 5471 can be read here http://www.irs.gov/pub/irs-pdf/i5471.pdf The actual form is at: http://www.irs.gov/pub/irs-pdf/f5471.pdf Some of the extra schedules are at: Schedule J http://www.irs.gov/pub/irs-pdf/f5471sj.pdf Schedule M http://www.irs.gov/pub/irs-pdf/f5471sm.pdf Schedule N http://www.irs.gov/pub/irs-pdf/f5471sn.pdf Schedule O http://www.irs.gov/pub/irs-pdf/f5471so.pdf You can find form T D F 90-22.1 here, Read the fine print at the bottom of form TD-F 90-22.1 - http://www.irs.gov/pub/irs-fill/f9022-1.pdf We had a 105 year old lady with a $10,000 fine for not filling in form TD F-90.22 A 68 year old lady had a $60,000 fine. ========================= You ask about prices. The following might help you. Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). This is not intended to be definitive but in general I am quoting $800 to $2,000 for a dual country tax return. $800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year. $1,000 would be the same with one rental $1,200 would be the same with one business no rental $1,200 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 minutes. $1,500 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 $2,000 would be all of the above and you moved in and out of the country. This is just a guideline for US / Canadian returns We will still prepare Canadian only (lives in Canada, no US connection period) with a three or four slips and no capital gains, etc. for $125.00 up. With a Rental for $300 A Business for $300 - Rental and business likely $400 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 $400 and up. TDF 90-22.1 forms are $25 for the first and $10.00 each after that when part of a tax return. 8891 forms are generally $50.00 to $100.00 each. 18 RRSPs would be $900.00 - (maybe amalgamate a couple) Capital gains *sales) are likely $50.00 for the first and $20.00 each after that. Just a guideline not etched in stone. -------------------------------------------------- David Ingram's US / Canada Services US / 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 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. 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