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U.S. Citizens Living in Canada Know Your Key U.S. Tax Forms and Responsibilities .pdf



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U.S. Citizens Living in
Canada: Know Your Key
U.S. Tax Forms and
Responsibilities

Cardinal Point Wealth Management 
& Cardinal Point Capital Management

U.S. Citizens Living in Canada: Know Your
Key U.S. Tax Forms and Responsibilities
Over the years, many articles have been written reminding U.S. citizens living
in Canada to file a U.S. 1040 tax return annually, in addition to the FinCEN
Report 114, Report of Foreign Bank and Financial Accounts (FBAR). While
the U.S. 1040 and FBAR are key documents most U.S. expats must complete,
there are other U.S. tax filings that unfortunately and all too often, are missed
or not filed properly.
Many of these missed tax filings relate to
U.S. citizens living in Canada who own an
interest in Canadian companies or
unlimited liability corporations, Canadian
partnerships, Canadian trusts, RESPs
and TFSAs, or even owners of Canadiantraded mutual funds or exchange-traded funds (ETFs) held in a non-retirement
account.
Here are seven key forms, often missed by U.S. tax filers living in Canada,
that you should be aware of:
Form 8858: Information return of U.S. persons with respect to foreign
disregarded entities A U.S. person who directly, indirectly or constructively
owns a foreign disregarded entity (FDE) must file this form. An FDE is an
entity that is not created or organized in the United States and that is
disregarded as an entity separate from its owner for U.S. tax purposes. For
example, a single member unlimited liability company in Canada that is owned
by a U.S. person would trigger filing this form.

Cardinal Point Wealth Management & Cardinal Point Capital Management

U.S. Citizens Living in Canada: Know Your
Key U.S. Tax Forms and Responsibilities
Form 8865: Return of U.S. persons with respect to certain foreign
partnerships This form must be filed by a U.S. person who owned more than
a 50% interest in a foreign partnership during the year or owned at least a
10% interest if the partnership was controlled by U.S. persons owning a 10%
or greater interest. A U.S. person also has a filing requirement if he or she
contributed property in exchange for a partnership interest if that person
directly, indirectly or constructively owns at least a 10% interest, or the value
of the property contributed exceeds $100,000.
Form 5471: Information return of U.S. persons with respect to certain
foreign corporations This form is filed by any U.S. person who is more than
a 10% direct or indirect shareholder in a foreign corporation. It is also required
for any U.S. shareholder in a controlled foreign corporation (CFC), which
broadly speaking is a foreign corporation, more than 50% of which is owned
by U.S. persons. A U.S. citizen or resident who is an officer or director of a
foreign corporation may also have a filing requirement if he or she acquired
stock in a foreign corporation. For example, if you or your business owns a
corporation in Canada, then you will want to file this form; the penalty for not
filing can be as high as $50,000.
Form 926: Filing requirement for U.S. transferors of property to a foreign
corporation Any U.S. person who transfers property to a foreign corporation
and owns more than 10% of the stock, or any amount of stock if cash
transferred is more than $100,000, must file this form with his or her U.S. tax
return. This form would apply if, for example, a U.S. person were to contribute
cash in exchange for stock to form a wholly owned foreign corporation.

Cardinal Point Wealth Management & Cardinal Point Capital Management

U.S. Citizens Living in Canada: Know Your
Key U.S. Tax Forms and Responsibilities
Form 3520-A/3520: Annual information return of foreign trust with a U.S.
owner A foreign trust with a U.S. owner, which can sometimes include foreign
pension plans, Registered Education Savings Plans (RESPs) and, depending
on how you might interpret the IRS Regulations, Tax-Free Savings Accounts
(TFSAs), must file this form independently with the IRS by March 15 following
the year to which it relates. Additionally, if a distribution or other payment is
received from the trust, Form 3520 may be required (and should be filed with
the taxpayer’s tax return). Failure to file these forms subjects the U.S. owner
to an initial penalty equal to the greater of $10,000 or 5% of the gross value of
the trust assets considered owned by the U.S. person at the close of the tax
year.
Form 8621: Information return by a shareholder of a passive foreign
investment company or qualified electing fund This form is for reporting
any interest in an overseas “passive” corporation (50% or more of its assets
produce passive income or 75% of its income is passive). This type of
investment comes with other issues, such as whether to make a mark-tomarket or qualified electing fund election, and subsequently how income and
gains are taxed. As we discussed in a previous article, even owning shares in
a Canadian mutual fund or ETF could trigger filing this form.
Form 8938: Statement of foreign financial assets A U.S. person must file
Form 8938 if he or she has an interest in specified foreign financial assets and
the value of those assets is more than the applicable reporting threshold.
Some assets are not required to be separately listed if they have already been
reported on one of the forms listed previously, such as the 8891, 3520 or
5471. Starting with 2013, U.S. entities will be required to file this form as well
as individuals.

Cardinal Point Wealth Management & Cardinal Point Capital Management

U.S. Citizens Living in Canada: Know Your
Key U.S. Tax Forms and Responsibilities
As a U.S. tax filer, it is very important that you fully disclose all of your
worldwide financial interests to your U.S. tax preparer, so that they have a
complete understanding of your financial affairs and can properly address all
of your U.S. tax filing obligations. Failure to file the above mentioned U.S. tax
forms can lead to substantial non-compliance penalties. Furthermore, make
sure you always work with a qualified preparer such as a U.S. Certified Public
Accountant (CPA) or an Enrolled Agent with the IRS who has a complete
understanding of Canadian and U.S. tax laws and has experience servicing
U.S. citizens living in Canada. At Cardinal Point, we specialize in assisting
U.S. citizens living in Canada with their complex cross-border tax filings and
financial planning challenges.

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As an American residing in Canada, it’s important to make
sure your financial affairs are structured properly to avoid
double taxation issues and ensure compliance with the
laws of both countries. If you would like to discuss your
cross-border financial planning needs or request further
information, please complete our contact form and a
Cardinal Point representative will reach out to you.
Request Consultation

Cardinal Point Wealth Management & Cardinal Point Capital Management

U.S. Citizens Living in Canada: Know Your
Key U.S. Tax Forms and Responsibilities
Copyright © 2018. Cardinal Point Wealth Management, LLC and Cardinal Point Capital Management Inc. All Rights
Reserved. "Cardinal Point" is the brand under which the dedicated professionals within the independent Cardinal Point
Group of Companies collaborate to provide financial and investment advisory, risk management, financial planning and
tax services to selected clients. Cardinal Point comprises two legally separate companies: Cardinal Point Wealth
Management, LLC, a U.S. registered investment advisor and Cardinal Point Capital Management Inc., a U.S. registered
investment advisor and a registered portfolio manager in Canada. Advisory services are only offered to clients or
prospective clients where the independent Cardinal Point firms and its representatives are properly licensed or exempt
from licensure. Each firm enters into client engagements independently. This brochure is solely for informational
purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal
capital. Legal and Compliance.
Tags: cross border wealth management, cross-border tax planning, cross border financial planning, americans living in
canada

Cardinal Point Wealth Management & Cardinal Point Capital Management


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