FAQs

A: Inheriting a US retirement account triggers a complex interplay of US estate withholding rules and Canadian income tax. The IRS generally mandates a 30% statutory withholding tax on non-resident distributions, which can sometimes be reduced to 15% under the Canada-US Tax Treaty depending on the distribution type (periodic vs. lump sum). Concurrently, the CRA taxes the distribution as ordinary income. We utilize a synchronized “What-If” tax credit matching framework to claim the US withholding as a Foreign Tax Credit (FTC) on your Canadian T1 return, minimizing double-taxation leakage.

A: While the sale of a principal residence is 100% tax-exempt in Canada under the CRA’s principal residence exemption, it is not completely exempt under US tax law. The IRS treats the sale of any global real estate by a US citizen as subject to capital gains. Under IRC Section 121, you can exclude up to $250,000 USD (or $500,000 USD if filing jointly) of capital gains, provided you met ownership and use tests. Any profit exceeding these thresholds is fully exposed to US capital gains tax.

A: This scenario exposes the Canadian firm to a dangerous operational trap: Permanent Establishment (PE) under Article V of the Canada-US Tax Treaty, alongside domestic State and Local Tax (SALT) Nexus. Having an employee execute contracts or provide core services from a home office in states like New York or California can instantly subject your Canadian corporate profits to US federal and state income tax allocations.

A: The IRS does not recognize the tax-free or tax-deferred status of Tax-Free Savings Accounts (TFSAs) or Registered Education Savings Plans (RESPs). The IRS classifies these vehicles as highly exposed foreign financial accounts. Income earned inside them must be reported annually on Form 1040, and they frequently trigger complex foreign trust reporting requirements (Forms 3520 and 3520-A), exposing the owner to aggressive statutory non-compliance penalties.

A: Operating a US rental property requires parallel filing. You must file IRS Form 1040-NR annually to report gross rental income, where we typically elect to deduct net expenses via a Section 871(d) election. When selling, you face immediate exposure to FIRPTA (Foreign Investment in Real Property Tax Act), which forces the escrow agent to withhold up to 15% of the gross sale price unless a formal withholding certificate is secured. The sale must also be declared on your Canadian T2 or T1 profile, utilizing Foreign Tax Credits to balance the exposure.

A: While a US C-Corp provides clean legal separation, it triggers immediate filing obligations on both sides of the border. If the US entity is 25% or more foreign-owned, it must file IRS Form 5472 along with Form 1120 annually. Failure to accurately disclose inter company transactions on Form 5472 triggers an automatic, non-negotiable $25,000 USD penalty per form. On the Canadian side, if the Canadian parent controls the C-Corp, it must file a T1134 Information Return with the CRA.

A: If your physical days in the US (calculated using a 3-year weighted average: all days this year, 1/3 of last year, 1/6 of the year before) equal or exceed 183 days, the IRS automatically deems you a US tax resident. This exposes your entire global income to US taxation. To counteract this, we model a defensive “What-If” layout utilizing IRS Form 8840 (Closer Connection Exception) or invoke the Article IV tie-breaker rules on Form 8833 to preserve your pure Canadian residency status.

A:If your physical days in the US (calculated using a 3-year weighted average: all days this year, 1/3 of last year, 1/6 of the year before) equal or exceed 183 days, the IRS automatically deems you a US tax resident. This exposes your entire global income to US taxation. To counteract this, we model a defensive “What-If” layout utilizing IRS Form 8840 (Closer Connection Exception) or invoke the Article IV tie-breaker rules on Form 8833 to preserve your pure Canadian residency status.

A: This triggers the aggressive Controlled Foreign Corporation (CFC) rules under the IRS. If a US person owns more than 50% of a Canadian corporation, the entity is a CFC. This subjects the business owner to complex US GILTI (Global Intangible Low-Taxed Income) taxation frameworks and requires filing IRS Form 5471 annually, transforming a standard Canadian corporate tax structure into an administrative and financial liability.

A: An Individual Taxpayer Identification Number (ITIN) is mandatory for foreign individuals who have US tax reporting obligations (e.g., US rental income, capital gains, or treaty-based withholding exemptions) but do not qualify for a Social Security Number. To bypass the risky process of mailing your original Canadian passport directly to the IRS in Austin, Texas, our firm serves as a conduit to verify identity documents locally and expedite processing via Form W-7.

A: If brother-sister companies or cross-border parent-subsidiary structures trade goods, services, or management fees without robust documentation, auditors will reallocate income. Under OECD guidelines and internal codes (IRS Sec. 482 / CRA Sec. 247), transactions must reflect “Arm’s Length” pricing. If a “What-If” analysis reveals unaligned margins, both agencies can assess retroactive taxes, interest, and multi-million dollar transfer pricing penalties.