Difference between the tax system in US and Canada

The US and Canada may both have Federalism outlined as their constitutional structure. However, it obviously doesn’t mean they have the exact same tax system. For those businesses crossing the borders of US and Canada, it’s a must to be familiar with the tax system, probably with the help of a Cross Border Tax Specialist for both countries to avoid getting taxed higher than expected, or worse, getting double taxed.

For several years now, the US has rejected the value added tax (VAT) and has been imposing on sales tax where the percentage may vary on most states, thus an income tax on the national level. Businesses aren’t taxed on income but are taxed based on profit. This means that business expenses can’t be taxed at all. Companies may have a lot of ways to claim that what they make isn’t profit at all upon consultation of a Cross Border Tax Specialist with a lot of Cross Border Tax Services to choose from, most especially if the business may need to cross borders to expand their profit and get taxed the least way possible.

On the other hand, Canada follows the Goods and Services Tax (GST) or to other provinces, the Harmonized Sales Tax (HST), where these provinces combine their GST to their provincial sales taxes. Some provinces in Canada pay their Provincial Sales Tax (PST) and GST separately, so your business may have to charge, collect and remit PST and GST. However, there are also provinces that do not have PST, thus only charging, collecting and remitting for GST for your business. So your location for business will definitely matter in Canada.

 

While the sales tax in US may be similar to the GST in Canada, GST is a broad based tax consumption abided by the consumer. Likewise, the sales tax is abided by the business itself. The sales tax rate may vary on the classes of goods, thus many classes and services cannot be taxed. However, the GST, as the name suggests, is taxed on both goods and services with a flat rate. It’s a tax paid by the end user. The sales tax can apply to goods that may vary on rates, while the GST can apply to almost everything on a given set rate.

 

Your GST in Canada will also depend on how small or big your business is, so it’s best to get a Cross Border Tax Services from a tax specialist if you will relocate your business in Canada or maybe expanding from US to Canada and vice versa. There are also ways to get your business exempted from the GST, such as the businesses that are small suppliers do not have to charge for the GST. Whatever the case, it’s best to determine the taxes of the locations first before settling your business.

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Rules and Restriction With Our Taxes

The US-Canada Tax Convention signed in 1980 or more commonly called as the Tax Treaty covers the foreign tax credits where individuals are protected from double taxation. Cross border tax services are essential in providing the guidelines for the rules and regulations of cross-border taxes.

Let’s assume we have, Savers, a Canadian manufacturer, who wants to test the US market and sent down a sales representative. The tax rules and regulations are as follows:

Subject to federal US tax. The Internal Revenue Code (IRC) enforces universal corporate income tax on a foreign corporation which is “engaged in trade or business” within the US Trade. Business generally requires a series of repetitive business engagements. Thus, when the Savers representative starts to gain sales, Savers may well be engaged in a US trade or business and subject to US tax. However, certain domestic US and Canadian tax law are regularly superseded by the US-Canada Treaty. It provides rules to resolve certain conflicts between domestic laws of US and Canada. To avoid any problem to arise, make sure to have a cross border tax specialist that can help you get an approval from the Canadian office.

Subject to state tax. There are different types of state taxes which includes capital/franchise tax, excise taxes, sales and use tax. Whether a Canadian company is subject to these taxes depends on its activity in the US. This is where a cross border tax specialist can assist you.

Does a Canadian company representative have any tax exposure? Under the US-Canada Treaty, the general rule provides the wages derived by a Canadian with respect to his employments is taxable only in Canada unless he is working in the US. If that is the case, the US can tax the employment income. There are two exceptions to this rule. First exception, no US tax is due if the amount received by the Savers employee does not exceed US$10,000.00. The second exception applies when the Savers employee is not present in the US for over 183 days in any calendar year. A cross-border tax specialist may need you to declare the time of your stay in the US so it’s easier to determine your tax exposure.

Other issues that may arise, independent from the rules and regulations, include tax consequences of disposing or unwinding of the business. The key is to get a cross border tax services that can help you review different issues.

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How to Identify Your Tax Filing Status

Without knowing the right tax filing status, you could end up paying more tax than you should or worse, you could end up filing for a wrong one. Selecting the right tax filing status can have a great impact on the tax benefits that you receive; the amount of taxes that you pay or the amount of your standard deduction.

Currently, there are five filing statuses for you to choose from. Most people can claim a filing status erroneously but in good faith. The filing status that is mostly filed in error is the “Head of Household” status.

In choosing the right filing status, firms such as AP Tax Group advice that you consider the following:

• Marital status. In considering the marital status, one must realize that the status of the person on the last day+ of the year represents his or her status for the entire year.
• Choices/options. At certain times, a person can fit into more than one filing status. In this case, one is free to choose the status that can give an individual the most benefit. It could be a filing status that affords a person of more tax benefits or a filing status that has the lowest taxes.
   
• Single Filing Status. If you have not been legally married, separated or divorced, then you can claim the Single Filing Status. Some have erroneous beliefs that being legally separated or divorced can afford them the single filing status.
   
• Married Filing Jointly. To some extent, this Married Filing Jointly status has some advantages over Married Filing Separately. Often, however, the differences in the taxes are so small that you might not even consider this. However, for couples who have separate tax brackets and would want to afford the same tax benefit when the other can and the other cannot, this status becomes beneficial.
   
• Married Filing Separately. Almost always, married filing jointly is the status that would benefit couples. In special circumstances, however, the status Married Filing Separately becomes more practical. We can consider the case of tax debt. When a partner has a tax debt, filing under the status Married Filing Separately makes the other partner liable for the same debt. This status, however, has some disadvantages over advantages on some couples. For couples filing separately, the deduction or tax exemption can only be applied once. If this takes effect, only one in the couple can list the child as a beneficiary to apply for a tax exemption.
   
• Head of Household. This status is considered to be the most filed in error. That is because most people think that this status applies to the breadwinner of the family. What most miss out is that the Head of Household status only applies to unmarried individuals that contribute equal to or more than half of the household expenses. Thus, this status can be filed as an alternative to the Single Filing Status if applicable.
   
• Widower with Dependent Child. This status applies to those whose spouse died during the preceding year of filing and those who have a depended child.

There are a number of firms that are willing to help you choose the right filing status and guide you in your taxation decisions. Among those is the AP Tax Group, which is among the most reputable firms there is.

Tax is a crucial part of an economically strong state or country. Though they may seem a burden to people in general, choosing the best filing status allows you to make the taxes work for you rather than against you.

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How a Cross Border Tax Specialist can deal with your Cross Border Tax Services

Let's admit it, nobody enjoys filing taxes. From the stressful process that, if given a decision, most businesses and people would like to delegate it to skilled person who have more experience using its intricacies - an expert or a specialist, as they say - which is particularly true as it pertains to cross border tax services between the US and Canada.

Listed below are four ways what sort of Cross Border Tax Specialist will let you with Cross Border Tax Services:

• Provide you with essential expertise. Cross Border Tax is complex and it could be very daunting to a person who is not really acquainted with the myriad laws applicable for all of us and Canadian individuals, corporations, partnerships, estates, and other entities. A Cross Border Tax Specialist shall offer the essential expertise on cross border tax issues.

• Keep tabs on changing tax laws. Tax laws are generally changing and whether you're a person working across the US and Canadian borders or a Canadian business proprietor investing in the United States or vice versa, it's practically impossible to keep an eye on the changing laws and requirements together with everything else that you'll require to cope with in your everyday activities. A Cross Border Tax Specialist could keep tabs on these noticeable changes for you and update you as necessary.

• Devote 100% of your energy and training on cross border tax. Cross border tax services from an expert - or a team of specialists - gives you full time assist in tax planning and preparation. This isn't someone merely focusing on cross border tax services privately or on the part-time basis. A cross border tax specialist devotes completely of their own time and training on cross border tax services and that means you can be confident that your taxes are being handled by a person who knows and understands the procedure like the trunk of their own hand.

• Maximize tax benefits. There are a variety of tax benefits open to employees and companies, however, almost all of these benefits can be found only once taxes are done regularly, otherwise, the power is lost. Needless to say, when you yourself have to juggle all your responsibilities, taxes are often pushed to the trunk burner until we're almost out of time. Insurance agencies a cross border specialist focused on this task regularly, you may make the almost all of these benefits because you are assured that your taxes are ready and filed regularly.

Filing and preparing taxes can be challenging - difficult even, for a few - but this doesn't have to be the case for you. With Cross Border Tax Services, an elaborate and stressful tax-filing process is an ordinary thing of days gone by. You can give attention to doing your work or managing your investments and business, while a Cross Border Tax Specialist dedicates their commitment to manage this technique for you.

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Become Recognized Experts in US-CANADA Tax Preparation

Cross Border Tax Specialist

Canada is the largest trading partner of the United States due to proximity. They have a very close economic and cultural ties. Many residents of one country often move to the other country to invest, to study, to work, to conduct business or even to pledge retirement. Due to the very unique tax systems of both Canada and United States, these two countries signed a tax treaty, also known as, Article XXIV of the Canada – U.S. Income Tax Conventions in 1980. This treaty sets out the rules for foreign tax credits which are available in situations where each nation claims a right to tax the same income. Moreover, the treaty also deals with the solution to be applied to specific types of income, specific occupations or financial investments,withholding taxes, and the determination of residence.

An individual or company who claims special exception from taxation under the specific tax laws in either U.S. or Canada because of potential double taxation may invoke protection under this treaty. Canada-US Tax Accountant is an expert in handling this.

If you’re a Canadian working in the United States, the Canada-US Tax Treaty gives you special rules to determine how you are taxed. Likewise if you are a U.S. resident working in Canada.

Personal income tax laws are greatly different between Canada and the United States. One of the primary differences is the U.S. tax laws are based on citizenship, while Canadian income tax laws are based on residency. If an individual is a full-time permanent resident of Canada, then he will be taxed on his worldwide income in Canada. Regardless whether the person’s citizenship is U.S. or some foreign nationality, they are taxable in Canada. If a Canadian citizen at some point leaves Canada and moves to the U.S. and severs all ties with Canada, that citizen is no longer a resident of Canada and not subject to Canadian income tax laws.

On the other hand, U.S. citizens have an ongoing obligation to report and declare their worldwide income to their motherland, regardless of where they reside. U.S. citizens who have permanently departed the U.S.A. and have become full-time residents of Canada are still required to file their U.S. income taxes on an annual basis with the Internal Revenue Service (IRS).

Becoming experts in US-Canada Tax preparation will most likely be achieved through a Canada-US Tax Accountant who can give you an overview of your circumstance. It is a good advantage to use the US-Canada Income tax treaty to reduce double taxation. If not for the treaty, Canadians would pay their U.S. tax on their income derived from U.S.A. to the IRS and pay again to the Canadian Revenue Agency. Same goes with U.S. citizens.

Individuals require help from AP Tax, to give them helpful assistance with all their tax preparation compliance needs. Services of AP Tax are confidential, affordable and in compliance withthe accounting industry standards and all applicable laws and regulations. AP Tax is also an expert in tax planning and preparation for individuals or entities that need to file in both US and Canada.

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All About Taxes

The United States and Canada have a close monetary and cultural ties due to proximity. It isn't surprising that citizens from both countries proceed to each other's country to get, study, conduct business, work or even to retire. Both national countries, the U.S. and Canada, have very unique system in taxation. Thus, they decided on the US-Canada Duty Convention authorized in 1980 or even more commonly called as the Taxes Treaty.

Filing US Taxes From Canada

The Duty Treaty addresses the foreign taxes credits which can be purchased in situations where each country claims the right to taxes the same income. Cross-border taxes Canada-US, through the precise tax laws transported by the Taxes Treaty, protects people from double taxation. In addition, cross-border duty Canada-US navigates through duty requirements for both Canadian and US interest, getting and holdings. US fees in Canada include personal and business fees, income from deal of properties and real estate taxes and rentals income. Each one of these require expert controlling to ensure legal fees are paid and fines are avoided.

Aside from steering clear of "twice taxation", the Duty Treaty and other amending protocols increases copper ration between your two countries also. The 5th protocol to the Tax Treaty was made to remove source-country "withholding" tax on cross-border interest payments. Carla Pehowski, older duty counsel, U.S. Taxation, RBC, records that, "The best advantage of eradicating withholding duty on cross-border interest repayments is the fact that cross-border businesses will have significantly more overall flexibility in choosing and dealing with their bankers" She further offers, "Any try to centralize all financing in Canada would cause a question by the lender for reimbursement of withholding taxes on any interest credited from the U.S. debtor. There's a complete layer of complexness and potential charge that will go away in the foreseeable future cross-border lending options." The 5th Process also contains allowing taxpayers arbitration to often insolvable double duty issues and making certain immigrant gains don't have double taxation.

In addition, here are some things you should know about fees:

1. Know which cross boundary forms you will need to document to the inner Income Service (IRS). US fees in Canada is from the IRS through the Canada Earnings Agency (CRA). Problems in getting ready these comes back can bring about penalties, taxes costs and interest obligations.
2. Deadlines are essential. Taxpayers who live have different deadlines than US overseas. Citizen moving into the U.S. Unless you meet these deadline, it could be quite costly.
3. Be sure you have a reliable cross border taxes specialist.

 

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