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Monday, May 25, 2015

5 Most Common Tax Mistakes of Canadians Moving to the United States

If you've been hypnotized by warm weather or the American dream and are considering moving permanently to the United States from Canada you need to read this. Here are some common mistakes that Canadians make when moving south:


    1. Selling your home in Canada AFTER you are a resident of the United States for income tax purposes. If you are no longer a resident of Canada when you sell your home, you do not qualify for the capital gains tax exemption for the sale of a main home.
    2. Leaving Stocks in Canada. Some stocks are excluded from the exit tax, but why take the risk? At the very least, call your stock broker to find out for sure whether these stocks can be excluded from the Canada Exit Tax. 
    3. Not selling or dissolving your Canadian Corporations BEFORE emigrating. Once residency is established in the United States, you will be taxed on world-wide income. 
    4. Leaving bank accounts in Canada. If you have foreign bank accounts outside the U.S., you will have to file FBAR's for each account if the total is $10,000 or more in US funds. Not reporting these accounts can mean forking over 5%-50% of the bank account totals to the IRS if you are lucky. If willful act is determined, it could mean jail time plus gut wrenching penalties and fines.
    5. Not filing a T1 Exit Return. You should file a T1 Exit return in Canada for the tax year you left. You will only have to pay tax on world-wide income before the exit date. After the exit date, you only pay tax on Canadian sourced income. 


Waiting until AFTER the move to sell or transfer assets is the most common mistake made by Canadians moving to the United States. When filing your T1 Exit return, you will specify an emigration date. On the date you specify, the CRA will look at every asset you hold and consider it sold by you (the Resident of Canada "you") and bought back by you (the Non-Resident of Canada "you").

If you have any questions about tax implications of moving from Canada to the United States, do not hesitate to contact a professional tax preparer such as myself. Waiting can cost dearly. Call today.

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