The “sprinkling” proposals issued in July 2017 were amended in December 2017 effective for the 2018 taxation year.
As you may recall, the July proposals were designed to tax at the top rate, individuals now over age 18 who are in receipt on what is called “split income” or TOSI (tax on split income). Before 2018, the TOSI was called a “kiddie tax.”
For 2018, the TOSI rules extend to family members who are not active in the business that are receiving dividend income on any type of shares they hold and on capital gains on the sale of shares that are not qualified small business corporation shares. The pre-2018 rules applying to those under age 18 did not extend to capital gains on the sale of shares. Read More
Every week, until the end of the year, we will be celebrating one of our top writers on TaxConnections.
This week we are honoring Larry Stolberg.
On December 18th, President Obama, signed H.R. 2029, the tax (the “Protecting Americans from Tax Hikes Act of 2015”) and spending bills (Consolidated Appropriations Act, 2016) to fund the government for its 2016 fiscal year.
The PATH Act ITIN renewal requirements: individuals who were issued Individual Taxpayer Identification Numbers (ITINs) before 2013 to renew their ITINs on a staggered schedule between 2017 and 2020 either in person before an IRS employee or a certified acceptance agent or by mail under procedures to be developed. Documentation proving identity, foreign status and residency is required for renewal. The Act also provides that an ITIN will expire if an individual fails to file a tax return for three consecutive years.
Similar rules apply to individuals residing outside the United States such as Canadians who applied for ITINS and file U.S. tax returns reporting their net rental income from U.S. real estate. It’s important to keep in mind that the
An important tax update was made regarding the rate increase and withholding of tax on U.S. property dispositions. On December 18th, President Obama, signed H.R. 2029, the tax (the “Protecting Americans from Tax Hikes Act of 2015”) and spending bills (Consolidated Appropriations Act, 2016) to fund the government for its 2016 fiscal year.
The December The Act increases the rate of withholding from dispositions of U.S. real property interests under §1445 from 10% to 15%, but remains at 10% for residences sold for less than $1 million.
The withholding exemption where the sale price is under $300,000US and the purchaser will acquire the property as their principal residence is still in effect.
Short Blog Posts In One Location…
◊ Green card holders who are holding cards close to 8 of the last 15 years need to examine their options to avoid becoming covered expatriates if they return to Canada and/or wish to give up the green card. Becoming a covered expatriate can have significant U.S. tax implications to you.
◊ CRA Form 1135 may become easier for 2015 if the aggregate cost of foreign property is not over $250K.
◊ Snowbirds need to watch their days presence in the U.S. to avoid deemed residency rules and related filing obligations! Read More
Short Blog Posts In One Location…
◊ FBAR DUE DATES ALIGN WITH TAX RETURNS
The SURFACE TRANSPORTATION ACT OF 2015
Confirmation that the foregoing ACT in Section 2606(3)(11) makes reference to Regulation 1.6081-5 of the IRC which confirms that the due dates will conform to the June 15th automatic extension if one resides outside of the U.S. on April 15th. One may file IRS Form 4868 to extend the date to October 15th. The Secretary may waive penalties for first time filers with the penalties if the 4868 is not filed.
◊ Leaving Canada requires departure planning not to be left to the day before you leave.
◊ CRA has changed the rules for the charitable gifts outlined in your WILL. Read More
It is not uncommon for e-filed returns or paper filed returns that claim a credit for US tax for CRA to request verification.
US tax paid per Canadian withholding slips are not requested because the slips are issued by a Canadian entity. They are looking to US tax claimed per US reporting slips such as W2s, 1099s, 1042s or from the US 1040/1040NR tax returns. US social security tax and medicare (ie., FICA) is creditable if it relates to US source wages or services performed in the US which is evident on the W2.
Foreign tax credits claimed in respect of US computed from the US tax return based on determination of what portion of the tax payable of the return relates to US source income that is creditable is usually supportable by submitting to CRA your schedules and copy of the federal (and state where applicable) return. Recently CRA has Read More
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
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
Is acceptance of a streamlined application automatic for those residing in Canada?
The primary criteria for acceptance into the Streamlined Foreign Offshore Procedure (“SFOP”) is that the reason for the non-compliance was due to non-willful conduct and that you meet a non-residency test.
Non-willful conduct requires you to certify on IRS Form 14653. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
The non-residency requirement is generally met if in any one of the 3 past due years, you Read More
I am a U.S. citizen and have resided in Canada for years and have not filed U.S. Returns. What can I do or what could happen if I do nothing?
U.S. persons including U.S. citizens or green card holders residing in Canada who are not up to date with their U.S. filing obligations should consider the available programs in an effort to become tax-compliant.
The updated streamlined procedures announced on June 18, 2014 modified changes to the 2012 streamlined program, now known as the Streamlined Foreign Offshore Program (“SFOP”) requiring the filing of 3 years of past-due returns (with required disclosures and Read More
Even with some economic recovery, the landscape in the U.S. has made it very attractive for Canadians to purchase vacation or rental properties in the warmer climates. Interest has increased as result of lower pricing as well as the stronger Canadian currency with anticipation of realizing significant capital gains when the market fully recovers.
Canadian businesses wishing to expand into the U.S. marketplace should be aware of the income tax implications with respect to deriving income in the U.S. and repatriating profits back to Canada.
The U.S. like Canada, have specific tax rules with respect to inbound investing by non-U.S. persons. Often the simple things to be in compliance are not provided to the investor as part of the marketing process causing unnecessary grief for the unwary.
Rental and Sale of United States Real Estate
Withholding tax on rental and sale
Canadians who intend to rent their U.S. property are subject to a 30% U.S. withholding tax on the gross rent. Read More