{"id":4959,"date":"2026-07-23T13:11:21","date_gmt":"2026-07-23T13:11:21","guid":{"rendered":"https:\/\/mytesting123.com\/taxsquare\/?page_id=4959"},"modified":"2026-07-28T12:25:08","modified_gmt":"2026-07-28T12:25:08","slug":"faqs","status":"publish","type":"page","link":"https:\/\/mytesting123.com\/taxsquare\/faqs\/","title":{"rendered":"Faqs"},"content":{"rendered":"

[et_pb_section fb_built=”1″ admin_label=”Header” _builder_version=”4.27.7″ use_background_color_gradient=”on” background_color_gradient_stops=”rgba(0,19,46,0.6) 0%|rgba(0,19,46,0.6) 100%” background_color_gradient_overlays_image=”on” background_color_gradient_start=”rgba(0,19,46,0.6)” background_color_gradient_end=”rgba(0,19,46,0.6)” background_image=”https:\/\/mytesting123.com\/taxsquare\/wp-content\/uploads\/2026\/07\/WhatsApp-Image-2026-07-23-at-6.31.13-PM.jpeg” height_tablet=”” height_phone=”400px” height_last_edited=”on|phone” custom_margin_tablet=”” custom_margin_phone=”||||false|false” custom_margin_last_edited=”on|phone” custom_padding=”106px||||false|false” background_last_edited=”on|phone” background_image_phone=”https:\/\/mytesting123.com\/taxsquare\/wp-content\/uploads\/2026\/07\/WhatsApp-Image-2026-07-22-at-11.34.46-AM.jpeg” background_enable_image_phone=”on” locked=”off” global_colors_info=”{}”][et_pb_row _builder_version=”4.16″ global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ global_colors_info=”{}”][et_pb_text _builder_version=”4.27.7″ header_font=”Darker Grotesque|900|||||||” header_font_size=”100px” background_layout=”dark” max_width=”760px” custom_margin=”||||false|false” header_font_size_tablet=”70px” header_font_size_phone=”60px” header_font_size_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n

FAQs<\/h1>\n

[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.27.6″ _module_preset=”default” background_color=”#ededed” background_enable_image=”off” custom_padding=”||||false|false” background_last_edited=”on|phone” background_enable_color_phone=”off” use_background_color_gradient_phone=”off” background_enable_image_phone=”off” locked=”off” global_colors_info=”{}”][et_pb_row custom_padding_last_edited=”on|phone” _builder_version=”4.27.6″ _module_preset=”default” custom_margin=”||||false|false” custom_padding=”||||false|false” custom_padding_tablet=”|150px||150px|false|false” custom_padding_phone=”|0px||0px|false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.27.5″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.27.6″ _module_preset=”default” header_font=”|800|||||||” header_font_size=”52px” header_line_height=”1.3em” header_2_font=”|800|||||||” header_2_text_align=”center” header_2_font_size=”43px” header_2_letter_spacing=”5px” header_2_line_height=”1.3em” custom_margin=”||||false|false” header_font_tablet=”|800|||||||” header_font_phone=”|800|||||||” header_font_last_edited=”on|phone” header_font_size_tablet=”70px” header_font_size_phone=”30px” header_font_size_last_edited=”on|phone” header_2_font_tablet=”|800|||||||” header_2_font_phone=”|800|||||||” header_2_font_last_edited=”on|phone” header_2_font_size_tablet=”70px” header_2_font_size_phone=”30px” header_2_font_size_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n

Frequently Asked Questions<\/h2>\n

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[\/et_pb_text][et_pb_toggle title=”Q1: What if a Canadian resident inherits a US retirement account like a 401(k) or traditional IRA?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/b>A: <\/b><\/strong>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.<\/p>\n

Run a Cross-Border Inheritance Scenario Audit<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q2: What if a US citizen residing in Canada sells their principal Canadian residence? Is it tax-free?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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<\/b><\/strong>\u00a0under 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.<\/p>\n

Schedule a Principal Residence Tax Modeling Session<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q3: What if a Canadian corporation employs remote staff physically working out of a US state?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>This scenario exposes the Canadian firm to a dangerous operational trap: Permanent Establishment (PE)<\/b><\/strong>\u00a0under Article V of the Canada-US Tax Treaty, alongside domestic State and Local Tax (SALT) Nexus<\/b><\/strong>. 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.<\/p>\n

Book an Employee Nexus Risk Assessment<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q4: What if a US citizen living in Canada opens a Canadian TFSA or RESP account?yee Nexus Risk Assessment%93″ open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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.<\/p>\n

Request a US-Citizen Friendly Portfolio Review.<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q5: What if a Canadian resident owns a US rental property? How are the rental yields and eventual sale taxed?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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<\/b><\/strong>\u00a0(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.<\/p>\n

Access our FIRPTA Withholding Mitigation Guide<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q6: What if a Canadian business forms a US C-Corporation? What are the cross-border disclosure traps?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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<\/b><\/strong>\u00a0along with Form 1120 annually. Failure to accurately disclose inter\u00a0company transactions on Form 5472 triggers an automatic, non-negotiable $25,000 USD penalty<\/b><\/strong>\u00a0per form. On the Canadian side, if the Canadian parent controls the C-Corp, it must file a T1134 Information Return<\/b><\/strong>\u00a0with the CRA.<\/p>\n

Review Your Form 5472 & T1134 Disclosure Requirements<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q7: What if a Canadian resident stays in the US too long and triggers the Substantial Presence Test?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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<\/b><\/strong>. 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)<\/b><\/strong>\u00a0or invoke the Article IV tie-breaker rules on Form 8833 to preserve your pure Canadian residency status.<\/p>\n

Consult a Residency Specialist on Form 8840<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q7: What if a Canadian resident stays in the US too long and triggers the Substantial Presence Test?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A:<\/b><\/strong>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<\/b><\/strong>. 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)<\/b><\/strong>\u00a0or invoke the Article IV tie-breaker rules on Form 8833 to preserve your pure Canadian residency status.<\/p>\n

Consult a Residency Specialist on Form 8840<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q8: What if a US citizen living in Canada operates a local Canadian small business (Incorporated)?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>This triggers the aggressive Controlled Foreign Corporation (CFC)<\/b><\/strong>\u00a0rules 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)<\/b><\/strong>\u00a0taxation frameworks and requires filing IRS Form 5471<\/b><\/strong>\u00a0annually, transforming a standard Canadian corporate tax structure into an administrative and financial liability.<\/p>\n

Model a GILTI Tax Mitigation Framework<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q9: What if a Canadian resident wants to apply for a US ITIN? What is the fastest compliant process?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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<\/b><\/strong>.<\/p>\n

Initiate an Certified ITIN Application Process<\/a><\/div>\n

[\/et_pb_toggle][et_pb_toggle title=”Q10: What if cross-border inter company transactions are audited by the IRS or CRA?” open_toggle_text_color=”#0c75ba” icon_color=”#0c75ba” open_icon_color=”#0c75ba” _builder_version=”4.27.7″ _module_preset=”default” title_text_color=”#0c75ba” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

<\/b>A: <\/b><\/strong>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.<\/p>\n

Request a Transfer Pricing Audit-Readiness Check<\/a><\/div>\n

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