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Monday, May 18, 2015

5 Need-to-Know Tax Tips For Americans North of the Border

U.S. taxes are just about the most complicated thing on earth. These are 5 amazing income tax tips for U.S. Citizens and greencard holders living and working in Canada in plane English that anyone can understand. Here they are:

You Could Be Subject to the Shared Responsibility Payment. 

As a U.S. Citizen living abroad, you can qualify for exemption C on form 8965 if you spent less than 35 days in the United States as an American expat living in Canada (or anywhere else). If you are a bonafide resident of Canada or another country (i.e. you have established a resident status in Canada and file a T1 as a resident of Canada), you can also claim exemption C on form 8965.

You Must File A Form 1040 & Claim All World-Wide Income

As a citizen or greencard holder living in Canada, you are subject to the same tax laws as residents of the United States. This means you file a 1040 each year just as if you were living in the U.S. Your Canadian based income is claimed on the 1040. You may claim the foreign income exclusion if you are out of the U.S. for 330 full days for the tax year or if you have established resident status in Canada. You may also claim the foreign income tax credit (my personal preference) or claim both forms 2555 and 1116 on your 1040 tax return.

You Must Report Activity from All Non U.S. Bank Accounts

Take a look at all your bank statements for all accounts in banks outside of the United States. Take the highest balance for each account in the given tax year. Add the highest amounts from each account together. Convert that amount using the end of year treasury conversion rate for the given tax year. If the amount equals $10,000 USD or more, you need to file FBAR FinCen report 114 to the BSA for each account. This is true for individual accounts, joint accounts, and corporate accounts.

Depending on your residency and filing status, you may also need to report your bank accounts to the IRS on form 8938.

Additional Child Tax Credit Is Available to Expats in Canada

The additional child tax credit is available to U.S. Citizens and Greencard holders with children in certain age ranges living in Canada. The maximum refundable tax credit amount is $1,000 per child up to $3,000. In order to claim this refundable tax credit, you will need to show an adjusted gross income. You will need to file the foreign income tax credit for at least some of your income if you did not earn any income inside of the United States. Children will have to be living with you and either U.S. or Canadian citizens.

Self Employment Tax in U.S. if Self Employed in Canada

Better think twice about starting a small business in Canada as an American Citizen or greencard holder. You are subject to self employment tax in the United States if you are self employed in Canada.

That's it for now, I hope these 5 tax tips for U.S. Citizens working in Canada were helpful to you. Borders Bookkeeping offers U.S. Canadian income tax preparation to Americans living in Canada. Contact us today for any tax preparation needs you may have.

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