In our ongoing effort to provide comprehensive information to people applying for visas to Canada and visas for US, we have gone “outside the box” as it were. While we are not tax experts by any stretch and the following is not to be considered legal advice, it is important to understand the tax issues for Canadians wishing to do business, work or immigrate to the US. We hope this general information is helpful but always consult with a tax expert before making a move to the US. Of course we are here to help with your US Visas!
And for those of Americans or foreign nationals wishing to immigrate to Canada, we have written a blog on tax for you as well here.
If you conduct business, own property or spend some of your time living in the United States, there are a couple of special considerations to take when filing your taxes, and you may have to file them in the United States.
The basic equation used to determine if you spend enough of each year within the United States to be considered a tax resident is:
How many days you spent in the U.S. during the current year + one-third of the days spent in the U.S. the previous year + one-sixth of the days spent in the U.S. the year before that.
The total days that must be spent in the U.S. for you to be considered a tax resident are 183. If your number meets or exceeds this amount, you must file taxes in the United States.
For you snowbirds, spending an average of around 4 months in the United States per year will usually meet this number.
Typically, If you conduct business within the United States by: shipping goods, soliciting business, having an office or consulting within the United States, you must file taxes there.
However, Canada has a tax treaty with the United States which renders most Canadians exempt from these taxes unless they have a permanent location within the country. A tax return must still be filed, using Form 1120F if you are a corporation and Form 1040NR if you are an individual, including Form 8833 to explain the exemption.
If you sell a property in the U.S., Form 1040NR must be used to report the sale. If you own a rental property in the U.S., you will usually have to pay a 30 per cent withholding tax.
What you can do, however, is use the net rental income method: because the tax is rather high, you can opt to file a complete U.S. tax return on your expenses and income on the property, which may lower the total tax.
Both of these tax filings are due on June 15.
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