CANADA - USA INCOME TAXES....$$$$

[Nicole_1228 5]

I have recently been told that the US has started a new tax return policy that could end up costing Canadians (and maybe even other immigrants) hundreds of dollars every year when they file and as well that I would have to pay to file taxes even if I was no longer working and living in the US and decided to move back home to Canada. Tried looking this up on the internet briefly and couldn't come up with anything so I thought I would post here and see if anyone knows what my friend is talking about and if there was any sort of truth to this? Possibly this has to do with the new immigration laws that have passed and may not even affect me?

I am getting married very soon and going to file a CR-1 if that helps at all.

[NikLR 13,232]

If you are a citizen of the USA you are required to file taxes. If you are LPR and not working in the USA you're required to file taxes. I'm unsure if there is anything that requires you to file taxes if you are no longer an LPR and did not become a citizen.

[Kathryn41 3,205]

I think the fact that you tried to look up this 'new' change in tax legislation and found nothing should indicate that this likely isn't a 'new' change.

There is a tax treaty in place between Canada and the US. Immigration laws and IRS regulations are two separate animals. I haven't heard of any recent changes in tax legislation that would impact Canadians (which is not to say that they don't exist).

There is a long existing tax situation that If you are a US citizen, even if you have dual citizenship elsewhere, and choose to move back home, you are still required to file a tax return every year with the US. The Canada-US Tax Treaty generally addresses the issue of double taxation so that is unlikely to happen (although there are some obscure areas with regards to investments and such where this is possible so you really would be best advised to use a cross-border tax specialist if you have certain investments).

If you are a permanent resident of the US you are required to file a tax return with the US government even if you are temporarily outside of the US at tax time. Remember, if you take up residence in another country and declare yourself a resident of that country for tax purposes you have basically cancelled your Permanent Residence status in the US. If you have to file a tax return in another country, you need to file it as a non-resident for that country.

If you decide to give up your permanent residency in the US you are only liable for filing a tax return that covers the time you were a permanent resident in the US. Once you give up your PR status you are no generally longer required to file a US tax return, although you may still need to if you still have US sourced income.

The easy key to remember this is that the US taxes on citizenship; Canada taxes on residency. The tax treaty also addresses the potential overlaps this can cause, including receiving US sourced income while in Canada and Canadian sourced income while in the US.

There are other issues of note that also are not 'new' but which you should know when you are immigrating. You are required to file a form declaring any foreign financial 'interests' you have that exceed $10,000, which includes investments (things like RRSPs, etc. are not included), bank accounts, property, etc. by June of each tax year. If you transfer any money to or from the US that is more than $10,000 you have to file a form declaring this transfer by June of that tax year, and if you receive more than $100,000 in any given year from a foreign source - including inheritances from family members - you are required to file a return declaring this amount due by the April 15 tax filing date.

Once you become a US resident you file an exit tax with Canada for the year you left Canada, and then unless you have a continuing source of Canadian based income that is not addressed through the tax treaty, you don't need to file any further returns with Canada.

Oh, one other note - the US and Canadian tax systems are also quite different and your first year here it will likely be rather confusing: Canada works with a tax credit system; the US works with a tax deduction system.

Edited August 3, 2013 by Kathryn41

[VeeNDee 44]

If you transfer any money to or from the US that is more than $10,000 you have to file a form declaring this transfer by June of that tax year

Does this mean when I moved down and transferred my money with me that I have to declare it on our joint income tax return for next year, or did I miss the June deadline this year, or do I not have to file a form and assume the bank did when it wired it cross-border? Any idea what this form is called, where to find it, or how to file it? Ugh, taxes.

[Kathryn41 3,205]

If the bank wired the money from your Canadian to your US bank, then the bank will have filed the appropriate paperwork and you don't need to do anything. You're fine. It is basically if you are transferring or carrying money across the border yourself. The form is FinCen form 105 and needs to be filed within 15 days of the transfer:

http://www.fincen.gov/forms/files/fin105_cmir.pdf

Here is an interesting article about what happens to those who don't declare the money: http://blogs.windsorstar.com/2013/06/17/millions-seized-by-u-s-officials-who-warn-declare-amounts-over-10000/

If you retain Canadian bank accounts that have more than $10,000 either individually or when added together - even if you hold an account jointly with someone else - you need to file form TD F 90-22.1 "Report of Foreign Bank and Financial Accounts". You don't file this with your income taxes either. You file it with the Department of Treasury by June of the following year. The US likes to know where Americans keep money as part of their anti-terrorism focus.

If you receive $100,000 or more as a gift or a grant or some other sort of investment funds, then you do need to file form 3520 "Annual Return to Report Transaction with Foreign Trusts and Receipt of Certain Foreign Gifts" with your annual return no later than the tax deadline of April 15.

Hope this helps clear up some of the confusion. Since you had your bank initiate the transfer they did the necessary paperwork so you don't have to.

Edited August 5, 2013 by Kathryn41

[VeeNDee 44]

Thanks Kathryn! Glad the bank will have taken care of that one. One last question (I hope) - if your Canadian bank account has less than $10,000 in it, and barely makes any interest, do you have to mention it or do anything special when filing US taxes?

[Udella&Wiz 325]

Thanks Kathryn! Glad the bank will have taken care of that one. One last question (I hope) - if your Canadian bank account has less than $10,000 in it, and barely makes any interest, do you have to mention it or do anything special when filing US taxes?

Don't know the answer to that question but I do know that if you have RRSP's/ RRIF's left in Canada there is a separate IRS form(8891) you need to file each US tax yr with the IRS to state the value of your retirement accounts in Canada.

Edited August 5, 2013 by Udella&Wiz

[VeeNDee 44]

Don't know the answer to that question but I do know that if you have RRSP's/ RRIF's left in Canada there is a separate IRS form(8891) you need to file each US tax yr with the IRS to state the value of your retirement accounts in Canada.

Good to know. I don't have any of those so that should make it less complicated. It's just basic a chequing/savings account.

[Udella&Wiz 325]

I miss the Canadian spelling of chequing

[VeeNDee 44]

I miss the Canadian spelling of chequing

Haha, me too! I've had to write a lot of cheques recently and started typing check, but auto corrected to cheque! I refuse to change!... ok well I think it is probably inevitable. My husband thinks that the spelling of cheque is hilarious... Che-QQQQQ, or something. It's just what we're all used to!

[NikLR 13,232]

I was tormented (jokingly of course) this weekend by hubs best friend and my adding of U to words like colour, humour, etc... and spelling of cheque and centre. Sigh. I told them it would be just as difficult for me to leave out the letter u in those words as it would be for them to put it in. Just because I'm in the USA, doesn't make me an American and I don't need to conform.

[ricnally 259]

I was tormented (jokingly of course) this weekend by hubs best friend and my adding of U to words like colour, humour, etc... and spelling of cheque and centre. Sigh. I told them it would be just as difficult for me to leave out the letter u in those words as it would be for them to put it in. Just because I'm in the USA, doesn't make me an American and I don't need to conform.

On the other hand,"when in Rome...."

[Nicole_1228 5]

thank you ! very helpful and gives me some in sight !!

[Kathryn41 3,205]

Thanks Kathryn! Glad the bank will have taken care of that one. One last question (I hope) - if your Canadian bank account has less than $10,000 in it, and barely makes any interest, do you have to mention it or do anything special when filing US taxes?

Sorry for taking so long to get back to you . . . no, you don't. If the total of all of the foreign accounts you have total less than $10,000, no, you are not required to file any sort of report or form with the IRS, or anyone else in the US - at this time . Who knows what will happen next year, but for now, you should be fine.

Edited August 11, 2013 by Kathryn41

[lilsweetie 32]

Would it cancel your PR status if you file both US and Canadian taxes each year (main reason being to keep medical in Canada) as we live on a border town and medical is much cheaper in Canada obviously. The taxes in Canada would be only as the difference between US and Cdn tax rates.