Sunday, 10 April 2016

Understanding the Cross Border Tax Canada-US

There are things U.S. citizenship guarantees. One of them is U.S. tax. If you’re a U.S. Citizen, you are expected to pay your taxes promptly and accurately regardless of where you currently live or where you get your income.

Because the U.S. and Canada share the same borders, it is not uncommon for U.S. citizens to transfer residence or work in Canada.

Canada imposes high-income tax and other taxes and people who pay taxes to Canada is convinced that they have no tax obligations to the U.S. They are mistaken and they risk themselves into being taxed both by the U.S. and Canada.

Here are some things U.S. Citizens need to understand about the cross border tax Canada-US:
  • You are protected against double taxation. Provided that you follow taxation rules, that is, you declare and file your returns to IRS promptly and accurately, you are protected from being taxed twice. The U.S. and Canada have an agreement that specifies which, among the two countries can impose tax on a U.S. resident in various circumstances where both countries have a right to tax the same income.
  • Even when exempted, you still need to file U.S. Tax Returns. The exemption does not necessarily mean that you need not file U.S. Tax Returns. It is one of the requirements for U.S. Citizens living in Canada. Failure to comply with this results in double taxation.
  • You need to be a resident of Canada in order to be exempt from US taxes. Although there are various types of residency (which have different requirements), merely by living in Canada for more than 183 days in a calendar year qualifies a person for a certain type of residency which in turn qualifies him or her for U.S. Taxes. Be warned, however, that there are rules regarding residency. Violating any of these may result in the revocation of the residency.
  • If you are a US citizen and is not a resident of Canada, you can be exempt from paying Canadian taxes. That is, provided that you get your income from a U.S. company based in Canada. If not, you will be exempt from paying U.S. taxes instead and will be required to pay Canadian Taxes.
  • Regardless of which country has the right to tax you, you still need to declare your income from all sources in the U.S. The U.S. requires that you report to them the amount of income you earn from all sources from any country. Even if you do not own the U.S. any tax, you still need to declare your financial information. The U.S. government has increased the penalties in the past few years for non-compliance.
  • There is a new, stricter law that is intended to seek out those who haven’t filed US tax returns in years. The improved agreement for the cross border tax Canada-US allows the IRS to gather as much information from every U.S. Citizens living and working in Canada. Avoiding this would result in you being fined greatly for non-compliance.


Post a Comment

Twitter Delicious Facebook Digg Stumbleupon Favorites More