Starting a US Business, US Citizen, living in Canada

QUESTION:

I am a US citizen and landed in Canada (21 years), my sister (US citizen, living in US) and I are partnering in a real estate investment company (LLC). Is there any concerns I should be aware of as we start the paperwork.  My husband (Canadian citizen) is financially concerned.    PS:  Is there someone near the Fort Erie/Buffalo border who specializes in this type of stuff?  Thank you!
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david ingram replies:

It is only paperwork. 

You will have to look after your LLC in the US first and pay tax to the US on any profits.  Then report the money again (likely on line 122) on your Canadian return.  If you have a loss, report it as a loss.  If there is a profit, the figure also goes on line 433 of your Canadian Schedule 1. Any tax paid on your 1040 and any tax paid to a state then are converted to Canadian dollars and that combined  figure goes on line 431 of your Schedule 1 to calculate the foreign tax credit.

Your bigger problems are likely:

1.   You should be preparing a US 1040 return each year to report your world income to the US.

2.   You should read carefully the bottom two questions on schedule B

3.   If you have Canadian Accounts with more than $10,000 combined, you have to fill out forms TFD 90-22.1 (minimum penalty for failure to file is $10,000 if they catch you first.  Maximum fine is $500,000 PLUS 5 years in jail

4,   If you have a foreign trust in Canada, you have to file form 8891 for each RRSP.  failure to file is a penalty of 35% of the amount in the RRSP PLUS 5% per year for each year not reported.


GOTO www.centa.com and read the Entering the USA section in the second box down on the right hand side.

Then read the Oct 95 newsletter in the top left hand box - this explains the special responsibilities of a US citizen living in Canada.

If you want to know about dual citizenship, read the Oct 93 newsletter. �

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