Our Expatriate Tax Clients
At Citizen Abroad Tax Advisors, we specialize in helping Canadian and American expatriates with their cross-border and non-resident income tax filing obligations. What’s your tax profile? Are you a cross-border commuter? Have you moved permanently from your home country? The following profiles will give you a better understanding of the various expatriate tax services we can provide to U.S. and Canadian citizens living or working abroad.
If your situation is similar to one of those below, contact our team of expatriate tax specialists today.
U.S. citizens living in Canada
Bob and Iris are US Citizens who have been living in Canada for the past 20 years. Prior to availing the services of Citizen Abroad Tax Advisors, Bob and Iris were using a large tax preparation chain to prepare their tax returns as they felt their returns were simple and the fees were much more palatable than those of larger specialized tax providers. It wasn’t until they spoke with their daughter (also a US citizen living in Canada) that they realized that their US and Canadian filings were likely deficient.
In their initial meeting with one of the Citizen Abroad Tax Advisors team it was determined that perhaps their foreign reporting on both sides of the border needed improvement as it was missing.
Bob and Iris have several brokerage accounts in Canada and the US and as a result, on top of reporting all their income in both Canada and the US, they have some complex reporting in their returns. Specifically, they should be:
- Reporting capital transactions originating from both the U.S. and Canada.
- Completing Form T1135, Foreign Income Verification Statement, for Canadian taxation purposes.
- Filing a Report of Foreign Bank and Financial Accounts (FBAR) statement.
- Filing form 8938, Statement of Specified Foreign Financial Assets, for U.S. taxation purposes.
To help Bob and Iris with their first year of correctly collecting the information for the complex reporting of foreign asset ownership, a Citizen Abroad advisor worked with them diligently to accumulate information for not only past filings but the current year as well. The process could have been much more overwhelming had our team members not worked alongside Iris as she collected the information.
U.S. citizen working in Canada
Although Tom lives in Arizona and works for a U.S.-based company, his work often requires him to stay for extended periods of time in Canada and Europe. To make things easier for himself, Tom holds a Canadian bank account with a balance of more than $10,000. Because he works in Canada, Tom is required to file a tax return as a non-resident of Canada and pay tax on his Canadian employment income. He intends to use the foreign taxes paid in Canada to offset some of the taxes due on his U.S. income tax return.
Citizen Abroad Tax Advisors prepared Tom’s U.S., Arizona and Canada tax returns, drawing on our experience with the foreign tax credit mechanism to help him fully recover the Canadian tax paid each year on his U.S. federal and state tax returns. Our team also recognized the need for Tom to disclose his Canadian bank account on a U.S. Report of Foreign Bank and Financial Accounts (FBAR) statement, which helped him avoid a potential $10,000 penalty.
In addition, our tax specialists were able to identify significant payroll withholding exposure for Tom’s employer—an issue that, if not addressed voluntarily, could result in significant penalties applied by the Canada Revenue Agency. We also assisted Tom with a reconciliation of tax paid under a tax protection agreement he has with his employer, ensuring that neither Tom nor his employer will be unintentionally disadvantaged when complying with Canadian tax law.
Delinquent U.S. income tax filers
Lacey and Tristan are American citizens who moved to Canada a decade ago. Today they own a manufacturing company—a Canadian corporation—and dividend out all the income from the company. Because they have not had any U.S. source income since moving to Canada, they were unaware they still needed to file U.S. income tax returns each year. They have, however, been filing Canada income tax returns for the past several years—and can use the foreign tax credit mechanism for their delinquent U.S. returns.
The couple met first with a U.S. based CPA, who estimated they would owe no tax for the past three years on their 1040 tax forms under voluntary disclosure. Lacey and Tristan then consulted with Citizen Abroad Tax Advisors for a second opinion—and we found that the U.S. CPA had missed several key tax calculations which stem from the Tax Cuts and Jobs Act passed in 2017. Many of the provisions are familiar only to cross-border tax specialists but in this case it was specific foreign corporate income reporting that the US based tax provider had missed.
Our team determined that while they could indeed ‘get compliant’ through the U.S. Streamlined Disclosure Program, there would unfortunately be a significant tax liability due to the new provisions and tax related to Foreign Corporations owned by US citizens. While we are never proud of having our clients pay more tax than expected, in this case we saved the couple from making a disastrous inaccurate and potentially problematic and costly filing with the IRS under an amnesty program.
Lacey and Tristan also had to file Report of Foreign Bank and Financial Accounts (FBAR) statements for the past six years. On their own, they were able to identify four accounts for disclosure. With some guidance from our team of tax specialists, they realized they were missing approximately seven accounts per year.
Canadians living in the U.S.
Shane and Elah are Canadians who moved to Los Angeles. With investments and bank accounts in Canada and the United States—as well as income from both U.S. and Canadian sources—they had to file both U.S. and Canadian income tax returns in the year that they moved. They also had to report their foreign investments in both Canada and the U.S.
Citizen Abroad ensured that Shane and Elah properly reported their TFSA and RESP income on their tax return to the IRS as well as their registered plan income on their California state income tax returns. We also identified the disclosure required on initial U.S. returns so Shane and Elah could start their U.S. tax filings on the right foot—making it easier for them to comply into the future.
Rick and Staci are Canadians who moved abroad to Saudi Arabia. For the year of their departure they filed a part-year resident income tax return and reported all Canadian and foreign income earned up to the point of departure, and deferred the departure tax on their worldwide property assets.
Citizen Abroad Tax Advisors helped Rick and Staci with their part-year tax returns in the year of their move. We also continue to assist them with their Canadian non-resident rental reporting, communicating directly with their professional property managers and assisting with the recovery of non-resident tax withheld on annual tax returns.
Individuals with non-resident rental properties
Although he lives outside of Canada, Gary owns a rental property in British Columbia. He is considered a non-resident for Canadian tax purposes and does have any other income to report on his Canadian tax return. Preferring to handle things himself, Gary has found his own tenants and chooses to pay all the bills for the property himself. However, because he didn’t have a Canadian agent to manage the property, Gary’s rents were going to be subject to a 25 percent non-resident tax withholding. With his rental property operating at a break-even point, this was going to have a significant impact on his personal cash flow.
After securing the services of a friend to become his Canadian resident agent, Gary turned to the team at Citizen Abroad Tax Advisors to ensure his friend complies with all required disclosures to the CRA (such as tax remittances and NR4 forms). Our team also helped Gary file his annual NR6 and Section 216 rental returns.