RRSPs for those Canadian Residents who have US obligations

The IRS announced on October 7 2014 that they would make it easier for taxpayers who hold interests in either Canadian RRSPs or RRIFs.    They announced that the Form 8891, that form that you had to report RRSP/ RRIF transactions, will be eliminated.  So if you are one of the many people with US filing obligations who had an RRSP after the mid 90’s, and you forgot to attach that 8891 to your 1040, you are absolved.  The IRS noted in their announcement:

“…Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment. The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present…”


Photo borrowed from http://www.taxsamurai.com/2014/10/form-8891-an-obituary/



It is really important to note that it does NOT mean you don’t have to file any FBAR or 8938 forms – or any pesky form under FATCA.  Read the announcement or the exact details as issued for further information

Foreign Income Easier to Monitor

Information will now be shared between the Canada Revenue Agency and the Internal Revenue Service.

Information will now be shared between the Canada Revenue Agency and the Internal Revenue Service.

In February of this year, an agreement was signed between the Canadian and American government which makes it easier for the respective entities to monitor income earned outside their borders.

Under the terms of this agreement, financial institutions in Canada will share information with the Canada Revenue Agency (CRA), who will pass this information onto the Internal Revenue Service (IRS).

This will allow the IRS to more easily determine whether income earned at a bank in Canada is being accurately reported on an individual’s tax return.

The same information will be shared in return, so that the CRA will now have greater access to financial information regarding Canadians who hold bank or investment accounts in the United States.

This information sharing regime does not apply to registered investments, such as Registered Retirement Savings Plans, Tax Free Savings Accounts, and Registered Retirement Income Funds.

The new reporting regime will come into effect in July 2014 with information exchanges beginning in 2015.

The CRA has indicated that they will not assist the IRS in collecting taxes and penalties that are owed to the IRS.

As well, the agreement will not impose any taxes on US citizens holding accounts in Canada. The agreement will work in conjunction with tax treaties that are already in place with the United States, which govern the withholdings and the taxability of income between the two countries.

If you have investments in the United States, you should advise your investment advisor that you are a Canadian resident, to ensure that the correct amount of tax is being withheld on your income.

For instance, if you are receiving dividends on US stocks, and more than 15% tax is withheld on these dividends, you are overpaying US tax on your investment. You will need to contact your advisor to adjust your account.

Now Offering US Tax Preparation Services for Individuals


Are you a US Citizen of Green card holder?

If you are a US citizen or green card holder, you are required to file a 1040 – US Individual Income Tax Return every year, regardless of what country you reside in.

Are you a Canadian Citizen who lives, works or has property in the US?

If you are a Canadian citizen resident in the US (watch for “Snowbird” rules), have US earned income or US revenue generating properties you may be required to file.

What are you required to file?

In addition to an Income Tax Return, you may have additional filing requirements based on your circumstances, which include but are not limited to:

  • Financial accounts outside the US exceeding $10,000 at any time during the year.
  • Ownership of RRSPs, Tax free savings accounts or Canadian mutual funds.
  • Non-US earned income exceeds the maximum allowed income exclusion.

When do you have to file?

 Filing deadlines for US income tax returns are generally April 15.

What happens if you don’t file?

 The US Government is taking a variety of measures to ensure compliance with their filing requirements, including scrutinizing passports for evidence of country of birth, which may result in travelling restrictions in the US and sharing of information with Canadian financial institutions. Significant penalties apply for non-compliance even though, in most cases, no taxes result from the filing of returns.

If you feel you may have a requirement to file a US Income tax return, contact the Burnaby office at (604) 291-1470 or the Grand Forks office at (250) 442-2121 to make an appointment to ensure you are in compliance with US Taxation regulations and that your Canadian and US Tax returns are prepared to fully utilize the US/Canada Tax treaty and minimize your taxes.



Snowbirds: Check Your Days

snowbirdnewsletterEach year, as the autumn leaves start to fall, many Canadian retirees head to the Southern States to soak up the sun.

Recently, many of these migrating “snowbirds” have been the focus of discussion due to increased vigilance by the Internal Revenue Service (IRS) regarding the filing of Form 8840. If you, a Canadian citizen, spend an average of 4 months each year in the United States, you and your accountant should discuss the potential requirement for filing this form.

The IRS uses a formula to calculate visitors’ eligibility. To illustrate this formula, let us use an example of a fictional Canadian snowbird, Jane Doe. For many years, Jane would leave Canada on November 1, travel to Arizona, and then return home to Canada on March 31. During the spring of 2012, Jane discussed with her accountant the possibility of filing the IRS Form 8840. In order to determine this need, they added the following three amounts:

• the total number of days Jane spent in the USA during the prior year (January to March 2011: 90 days; November to December 2011: 61 days; 90 + 61 = 151);

• the number of days Jane spent in the USA two years ago (January to March 2010: 90; November to December 2010: 61; 90 + 61 = 151) multiplied by 1/3 (151 * 1/3 =50.33);

• the number of days Jane spent in the USA three years ago (January to March 2009: 90; November to December 2009: 61; 90 + 61 = 151) multiplied by 1/6 (151 * 1/6 = 25.16).

Jane’s formula total was 226.49 (151+ 50.33+25.16). Jane and her accountant realized this total was greater than the 183-day threshold, so Jane was required to file Form 8840 by June 15, 2012. All Canadian travellers who calculate a formula total more than 183 days must file IRS Form 8840. The form includes a list of questions determining how closely one is linked with the United States. Individuals who file this IRS Form 8840 are exempt from filing a personal income tax return in the United States.

If you would like assistance with the filing of this form, please contact your local Kemp Harvey Group office more information.

Are you a US citizen or green card holder living here in Canada?

The rules for those people who are required to report to the Internal Revenue Service (IRS) of the US are complex.  Moreover, even the experts can’t seem to agree on what is required.   There seems to be little clarity and the “little guys” are at the losing end of this requirement.  This article News Analysis: The Personal Impact of Offshore Enforcement  by Marie Sapirie talks about four different actual scenarios of people living outside the US who found out that they were required to report to the IRS &/or the Department of Treasury and the horror they went through.  It is really important that you not only understand the basics of what is required, but also understand that none of this is clear cut.  Even when IRS agents are asked direct questions about those FBARs, nobody seems to have a clear and consistent answer.

us1040It is a requirement that any tax preparer who prepares a US tax return for money is registered with the IRS. You are also able to file your own 1040 if you are so inclined.  Make sure you do your research as to what has to be filed and when.  Make sure you file any required extensions if you need extra time.

If you do decide to hire someone to do this for you, remember they must have a PTIN number.