Larry Stolberg, CPA, CA | TaxConnections

16 Nov 2015

US Citizens Pensioners Please Note

US citizens residing in Canada are not taxable on their US social security for US tax purposes in accordance with Article XVIII of the Canada/U.S. tax treaty. The country of residence taxes the other countries social security payments to 85%. Likewise CPP or OAS from Canada is excluded on the US 1040 if you reside in the US. If the particular social security payment is included in a country’s tax return, generally the maximum income inclusion is 85% to the taxable income computation.

The foregoing also applies to part-year residents which would require using these concepts.

Many returns are incorrectly prepared not recognizing this treaty provision generally resulting is additional tax paid more so for those in higher marginal tax bracket due to significant other sources of income subject to tax. Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada

13 Nov 2015

Canadian Privately-Owned Investment Corporations Should Not Late File Their Corporate T2 Tax Returns

Companies that earn passive or investment income such as capital gains, interest or rental income pay corporate tax at a higher rate than the low rate on active business income. To ensure integration of the tax system, part of the Part I tax and where applicable Part IV tax goes into a notional refundable dividend tax account (“RDTOH”) that is refundable when a taxable dividend is paid to the shareholder or to a recipient corporation. The dividend refund also results in a reduction in the RDTOH of the payor corporation.

In order the obtain the dividend refund, the corporate returns of the payor must be filed on a timely basis and no later than 3 years after the end of the year in which the dividend refund arose. Annual filing due dates of the T2 is within 6 months after the end of the taxation year. Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada

11 Nov 2015

From Canadian Tax Court

Application for extension of time to file appeal granted — applicant acted as soon as circumstances permitted

The applicant was seeking an order to extend the time within which to appeal his assessments for the 2007 and 2008 taxation years. The applicant filed paperwork to appeal six months after notices of reassessment were issued, in the belief that he had eighteen months to appeal. In fact, appeals must be filed within ninety days.

The application for an order to extend the time to appeal was granted. An order extending the time within which to appeal may be granted subject to the conditions set out in the legislation. The applicant must show an intent to Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada • Tax Tips

10 Nov 2015

Personal Services Provided In The United States

Individual contractors from Canada providing services in the U.S. in the capacity of self-employed individuals or utilizing their Canco should be aware that depending on the number of days present and percentage of U.S. gross business income, Article V, paragraph 9 of the Canada/U.S. Tax Treaty may deem them or Canco to have a permanent establishment in the United States. This stems from the 2007 Protocol that in this respect was effective commencing in 2010.
Since 2010, this means that income will be subject to U.S. taxation requiring the filing of U.S. federal and possibly State returns, however foreign tax credit is available on the Canadian tax return.

Previously, independents had to demonstrate that they were not carrying on business in the U.S. through a Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada • Individual • Tax Tips

09 Nov 2015

New Proposed Regulations 2801 For Covered Gifts/Bequests From Expatriates

U.S. citizens or long term residents who are covered expatriates who gift property during their lifetime or have bequeathed property upon their death, to a U.S. citizen or U.S. resident will cause the recipient of the gift to pay gift tax to the extent that the taxable gift exceeds the annual exemption. For 2015, the annual exemption is $14K. For this purpose, resident is one who is domiciled in the United States.
There are also similar rules or application where the recipient is a U.S. trust. Recipients of a “covered gift” or of a “covered bequest” who are charities are exempt from paying the gift tax.

Therefore any U.S. citizen or long-term resident who has expatriated under S877 of the IRS Code AND who is classified as a “covered expatriate” under S877A of the IRS Code will cause the recipient to pay this tax. The tax Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada • Expatriate • Gift Tax

06 Nov 2015

Section 55 Proposed Amendments Affecting Inter-corporate Dividends

The 2015 Federal Budget proposals to section 55 may cause otherwise tax free inter-corporate dividends to be subject to taxation as proceeds of disposition (ie., capital gains) that previously were exempt from the ambeit of section 55. Computation of safe income or post-1971 tax retained earnings may now be required in every instance to ensure one is not caught. Timely section 55(5)(f) designations filed by the recipient corporation may also have to be made. The proposal was to be effective for dividends paid after April 20, 2015. Hopefully there will be further consultation on the matter and the final legislation will only affect those circumstances to which the proposal was intended.

Caution should be made to companies currently paying dividends or wishing to implement various purification techniques, capital gains crystallization and other restructuring that may involve section 55 of the Income Tax Act Read More

Written by Larry Stolberg, CPA, CA | Posted in Corporate

05 Nov 2015

FBAR Due Dates Align With Tax Returns

The SURFACE TRANSPORTATION ACT OF 2015 became law in late July, 2015. The tax provisions changed a number of due dates effective for tax years beginning after December 31, 2015 for partnerships, C corporations and S corporations. Surprisingly, was a change for FBARS or FINCEN114 that will now align commencing for the 2016 taxation year the FBAR (Report of Foreign Bank and Financial Accounts) due date with the due date for individual returns, moving it from June 30 to April 15. The bill instructs the IRS to modify existing regulations to reflect the changes to tax return filing deadlines.

This will mean that for 2016 tax return filers the FBAR will be due April 15, 2017 which is the normal due date for U.S. persons residing in the U.S. on April 15th. It appears that alignment will also mean that the automatic extension to June 15 for those residing outside of the U.S. will be accepted as not late, but more importantly, it Read More

Written by Larry Stolberg, CPA, CA | Posted in Canada • FBAR

02 Nov 2015

Canadians Selling or Providing Services to the United States

If you have accounts receivables from a US entity, you may get the request for a W8-BEN or a W8-Ben-E form. Without this form, the payor of your accounts receivable will withhold a non-resident tax. The only way to get the refund of the tax is to file a US non-resident return, either a 1040NR for individuals or a 1120F for corporations. The waiver form indicates to the payor that you are exempt from US taxation under the Canada/U.S. tax treaty.

Note that if you are considered to be carrying on business in the United States, then the waiver may not apply if it is considered that you also have a permanent establishment in the United States by virtue of Article V of the treaty. In this regard you should obtain professional advice on Read More

Written by Larry Stolberg, CPA, CA | Posted in Tax Provision/Tax Reporting

11 Nov 2014

What Offshore Delinquent U.S. Individual Filers Need To Know! – Part 5 (Final)

I am a U.S. citizen and reside in Canada. I have filed U.S. returns annually, however I may have omitted some income or computed income incorrectly and omitted one or more international information returns. Can I rectify the issues with the streamlined program?