PAY FICA or CPP or not - international non-resident cross border expert income tax & immigration help estate family tru

At 01:21 PM 7/27/2007 -0700, you wrote:
There is NO tax advantage to you to have a corporation in the US and a lot more accounting costs for a very dubious hint of personal liability protection with a Subchapter S US corporation.

Hi David,

I have heard you and others say the above statement, although our own experience is a little different. The first year we moved to the US we were not incorporated and the amount of our FICA tax was enormous because we were self-employed. Our local accountant advised us to form an S-Corp. so that we could receive part of our compensation in dividends, thereby avoiding payment of FICA taxes on that amount. It seems to me that this is a common practice here. Have you thought of this aspect?

As always, I love reading your emails ... thanks!


david ingram replies:

I understand the FICA problem but you are missing the point that the FICA is a pension and a form of forced savings.  Avoiding it assures less money in retirement the same as avoiding CPP payments leaves one short in retirement in Canada. 

I was NOT there for the start of the FICA but I was in the middle of the introduction of CPP in Canada and am seeing the aftermath today.  I could likley name 100 people who were well off at one time and have fallen on hard times today because of health, divorce or just plain business disasters. 

I can even use myself as an example because I turn 65 in Sept and have gone through a $5,000,000 bankruptcy and $1,000,000 divorce in the last 5 years.  I will receive a reduced CPP because of  several years of non-contribution when I was literally flying high. 

Every week, I run into someone who is now living on their CPP and OAS or their CPP FICA and OAS mixture and is getting less because they arranged their affairs to pay less into CPP or FICA and today, they have lost all their investments (through illness, divorce or business reversals) and could really use that extra .  $3, 4 or 500.00 per month.  

Strangely, Life Insurance sales people and Realtors, in particular are the worst victims (you notice I did not use the word offenders) because they set themselves up to deduct everything before net income by being self employed whereas they could  have had  full CPP or FICA benefits by being employees and paying CPP or FICA on gross income and then making just about the same income tax deductions as an employee.  (this does require a little manipulation to deduct fax and other machinery but it can be done safely and legally and then the realtor, etc. does not have to rely on welfare in retirement). 

This last statement came to roost just last week when a former West Vancouver realtor wrote me to say that she just couldn't pay a 3 year old bill she had with me because a leaky condominium situation had wiped her out. she has moved to a small town 300 miles away because she does not want to be around her former friends and colleagues as a flat broke retiree getting GIS (guaranteed income supplement which is a politre word for welfare).

Then another recently retired lady called 'today" while I was in teh caribbean Days parade  to ask me to represent her at a strata meeting because she has just been told about a $75,000 leaky condo assessment on her rental condo and that will take $600 a month out of her retirment income for a long long time.
So, I have thought about the "not paying FICA/CPP argument) it but consider it false economy for more reasons than one. 

All sorts of financial people have also shown how much better off you would be if you took the money you have to pay into FICA  or CPP and invested it yourself in "their" product.  Interestingly, two of the high profile Vancouver people who have been pushing that concept for 20 years are living in pure poverty today in Vancouver because of large scale financial reversals.  Knock on wood that I did not become one of them myself.

Interestingly, their clients have done better than they did because the advisors  took big time 'flyers' that did not work while their conservative clients stayed safe.

Please do not fall into that same trap.  However, But,  IF you are not paying into FICA or CPP, do invest what you would have been paying into a sound and safe investment and do not waste the tax 'savings' and spend it in a frivilousl manner.

The problem with making the investment, of course, is that with the exception of Saskatchewan and Texas and a couple of other places I do not know about, most of the private retirement plans can be attacked when you are in financial distress. CPP and FICA can NOT be attacked by creditors. Living in BC, I would have lost any RRSP account I might have set up.

David Ingram
It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when i am out of town. 

However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. As an example, as I write this on June 28th, since June 16th (12 days), my 'spammed out' box has 7,118 unread messages, my deleted box has 2630 I have actually looked at and deleted and I have answerd 63 email questions I have answered for clients and strangers.  I have also put aside 446 messages that I am maybe going to try and answer because they look interesting.

Therefore, if an email is not answered in 24 to 36 hours, it is lost in space.  You can try and resend it but if important, you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321

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 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)
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. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included."
David Ingram gives expert income tax & 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 & authority.
Phone consultations are $400 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.
This is not intended to be definitive but in general I am quoting $800 to $2,800 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

$1,600 would be for two people with income from two countries

$2,800 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 two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
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 $800 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 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. 
This from "ask an income trusts tax and immigration expert" from or or David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention

David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty

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international non-resident cross border expert income tax & immigration help estate family trust assistance expert preparation & immigration consultant david ingram, income trusts experts on rentals mutual funds RRSP RESP IRA 401(K) & divorce preparer preparers consultants Income Tax Convention Treaty
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