File form 1040?

[purem4g1c 113]

Hi there,

 

I just moved to the USA on May 27th to be with my wife. We are married and now all the confusing money situations are here. I own a business in Canada which is still "active". It is not making money as I'm not allowed to work in USA since I entered on a K-1 Visa. The thing is though is that my Canadian company pays out each year a dividend of $40,000 to myself. I assume I will have to report it to the IRS, but who am I paying tax to Canada, or USA? I know I have to file tax to both but I know I won't have to pay the money to both since there is a tax treaty between both countries. I am trying to find a accountant who specializes in cross border accounting in Central Florida if anyone knows anyone i'd appreciate it.

Thank you!

[WOODHIKER 30]

This response is solely to your question of which country you pay tax to and the answer is on the assumption that for the 2018 tax year you will be considered a resident for tax purposes.  Canada taxes its citizens on income earned in Canada, whereas the US will tax its residents on worldwide income.  So, since you received dividend income in Canada in 2018 you will have to file a return in Canada and pay tax on the dividend income.  Now, again assuming you are a US resident for tax purposes, you will then file a US tax return reporting the dividend income, but you will get a credit, Foreign Tax Credit, for taxes paid to Canada on the dividends such that it will probably result in you paying no US taxes on those same dividends.

 

In your case you have a number of unique issues.  The first is that the income comes from dividends and not wages and there may be something in the US/Canada tax treaty that treats the taxation of dividends differently than the taxation of wages such that my answer above is moot.  In addition, as owner of a foreign business you may have FBAR reporting requirements including reporting requirements of ownership in a foreign corporation.  I suggest that anyone you find to assist you, whether it's an accountant or tax attorney, they are very knowledgeable with these reporting requirements since the penalties the IRS can impose if the reporting is not done properly can be onerous.  

[US-UK 32]

FBAR and FATCA and there’s clearly not enough detail here to know if this is a CFC or PFIC (or neither or both), but you may want to pay close attention to the current and proposed changes to the rules for PFICs in case this or something else you hold is in scope..

[JP John 65]

Find a good accountant that deals with Canadians in the USA

[Nicole567 25]

Once you've ceased residency in Canada you'll file a final return in Canada on that income at the end of the year and put that you left the country on 5/27, that will mean that you're tax credits will be prorated on that income.  At the end of the year you'll file your US return and say that you entered the country on 5/27, therefore, again credits will be prorated on income.  I'm not sure how you're dividend is paid but if you're paid monthly technically you earned 16,700 as a Canada resident and the remaining 23,300 as a US resident.  I believe, that since you are earning from a Canadian source you'll still have to file the Canadian return annually reporting income, however, it should be exempt because of the US/Canada treaty.

 

Another thing you should consider, since you left Canada and have a business there you are taxed on any capital gains earned to this point.  So if the business has gone up in value since you purchased it you will pay tax on that capital gain.    

[Fasqwer 0]

It would be interesting to read tax information from a trusted source.