Newsletter of: the CEN-TA Group Feb 28 1999
This is a short newsletter designed only to give you the information on the offshore reporting of out of country assets. This was first proposed for the 1996 year, but was postponed for two years.
Here is the form. Because of the strike at Revenue Canada, I have
been unable to get hold of an original.
All any of us can do is use a copy of the form. Our Email
subscribers are not going to get a copy of the form because I am
not going to worry about getting a copy out of a file that only some can read on their systems.
If you have more than $100,000 of "out of Canada" assets, email
me to firstname.lastname@example.org with both a fax number and a mailing
address and we will send you the form by mail or fax.
OTHER INFORMATION for the self-employed.
If you are in business for yourself or thinking of going into
business, get hold of two different books/pamphlets from Revenue Canada. In Vancouver you can call 666-7577 to order these booklets. Or if you are hard of hearing or blind or almost blind, you can call 1-800-267-1267 and ask for a Braille edition, a
LARGE PRINT EDITION, an audio cassette, or a computer
disk edition of many different publications. Some forms and items
are also available on the INTERNET at www.rc.gc.ca.
The two booklets I particularly recommend are:
1. Guide for Canadian Small Businesses [RC4070(E) - 3936]
2. Employee or Self-Employed [RC4110(E) - 1219]/
Another booklet for Snowbirds or those who spend any time in the United States is entitled:
3. Canadian Residents Going South [P151(E) - 3360]
and if you are thinking of divorcing or are already separated or
4. Support Payments [P102(E) - 2130] will
discourage you for sure from divorcing.
Of course, before you divorce, read the excellent "DIVORCE
FROM HELL" by Wendy Dennis. This story will make everyone
"try a little harder" before calling in the divorce lawyers.
Remember! Your U.S. returns are due April 15 but are
automatically deferred to June 15 if you are living in Canada. Your
Canadian return is due April 30th unless you live out of the country in which case, Section 216(4) rental returns and world income tax returns for OAS purposes are due on June 30, 1999. Trust returns are mostly due on March 31, 1999 for 1998.
Remember, Canada is a *censored*cat compared to the U.S.
If you are a U.S. citizen with offshore bank accounts or securities
accounts or foreign corporations or even something as innocuous as a Canadian RRSP, the penalties are really large for failure to report your offshore items to the IRS and / or the U.S. Department of the Treasury.
Any U.S. citizen with more than $10,000 aggregate in offshore
accounts MUST file a TDF-90 with the Department of the
Treasury in Detroit. This TDF-90 form does NOT get filed with
the U.S. tax return but goes to a separate address in Detroit.
Failing to report the offshore accounts to the U.S. (which include
Canadian RRSP accounts) can incur a fine of up to $500,000 U.S.
PLUS up to FIVE years in jail.
Ownership of 5% or more of a Canadian (or Australian or French)
corporation requires the filing of a 5471 form. Penalties for failure
to file this form are $1,000 for the first 90 days and $1,000 every
thirty days thereafter to a total of $25,000 per company per year.
The usual trigger amounts are when a U.S. citizen or resident gains control of the Canadian company or trades 5% or more of the outstanding shares.
The 5471 requires your accountant to convert the Canadian
Corporate figures to U.S. and file the form with the U.S. citizen's
WATCH OUT if you are a Canadian performing any services in
the U.S.A., even if you are paid exclusively from Canada. In my
opinion, the IRS seems to be on a project of "hunting down
Canadians" who are not filing their U.S. federal and state income
Remember, even if your paycheque is generated in Canada, if you
perform "any" services in the United States, you are required to file a U.S. 1040NR or 1040 income tax return even if the only purpose is to exempt the income under the treaty. If you do not file on time, you can end up paying income tax on exempt income.
As an example, the U.S. state governments are going after
Canadian trucking companies who have trucks picking up and
delivering in the United States. The United States are requiring tax
returns to be filed back to Jan 1, 1992. (For an example, ask for
the Nov 96 CEN-TAPEDE.)