1. Living in Canada with US citizenship
A few basics for the US citizen

2. Agenda Who needs to be aware of US tax compliance
Some basics for the US Citizen in Canada
Some differences between US and Canada
Some common scenarios and forms that need to be filed
FATCA – briefly , what is it ?
Offshore Voluntary Disclosure Initiatives
Estates and Gifts

3. There are a few things every US Citizen needs to know if they are going to live outside the US.
What has to be filed for Canada? What has to be filed for the US? Where can you find the resources you need to help you ?

4. Who should file a US Tax Return ?
US Citizens
Resident aliens who lived or worked in the US
Green Card holders
Anyone who does business in the US
Anyone who has rental property in the US
Anyone who had tax withheld by the US and wants a refund

5. Canadian / US comparison
Taxation based on residency
Foreign Tax Credit (FTC) for taxes paid to US
Unused FTC can be used 3 yrs back & forward 10 yrs
United States
Taxation based on residency or citizenship
Foreign Tax Credit (FTC) for taxes paid to Canada
Unused credit can be used 1 yr back & forward 10 yrs

6. Canadian and US requirements
Tax Return
Foreign Reporting ?
Informational filings ?
United States
Tax Return
Foreign Reporting ?
Informational filings ?

7. Quick reference chart

8. Estimated Tax Payments
must pay if:
Canada ( INNS3)
taxes due in 1 of 2 prior years > $3000 and current year taxes owed will be > $3000
Instalment Due Dates
March 15th, June 15th Sept 15th & Dec 15th
Penalty may be applied if late or underpaid
US (1040 ES)
taxes due of $1000 or more
Instalment Due Dates
April 15th, June 15th Sept 15th & Jan 15th
Penalty may be applied if late or underpaid

9. Basic Income Tax Returns
Canadian Tax Return (T1)
Due date April 30th
No extensions
One return per person
Worldwide income included
Foreign tax credits available
10 year carry forward period
US Tax Return (1040)
Due date June 15th incl 2 mnth ext
Extension to Oct 15th
Joint returns for couples
Worldwide income included
Foreign tax credits available
10 year carry forward period
Some exemptions for specific types of income
CPP, Soc Sec, foreign wages

10. Forms to include with US tax return
Form 2555 – Foreign Earned Income
US allows a set amount of foreign earned income to be excluded from income tax
2015 exclusion limit is $100,800
Form 2555 is used to elect the use of an excluded amount
Earned income includes salary, wages, professional fees, home or car allowances paid to you
Foreign earned income does not include: pension or social security, dividends, capital gains, or alimony
Also used for the housing deduction and exclusion calculation
Due Date - submit this with your 1040 return

11. Forms to include with US tax return
Form 2555 – Foreign Earned Income – cont’d
To Qualify to use this form, your tax home must be in a foreign country (like Canada) AND one of these two tests must be met:
Bonafide residence (part II of form 2555)
Resident for one full tax year
Physical Presence (part III of form 2555)
Resident for 330 days within 12 month period

12. Forms to include with US tax return
Form 1116 – Foreign Tax Credit
This form will calculate the foreign tax credit available for use against US taxes.
Taxes paid on excluded income are not included here
Each category of income and taxes paid on that income are reported separately
Catagories included are:
Passive – dividends, interest, rents, royalties,
General – wages, salary, business income
901(j) income – from certain sanctioned countries (no credit for tax)
Income re-sourced by Treaty
Lump sum distributions from pension

13. Forms often overlooked
Some forms are commonly missed probably because they are informational and don’t calculate tax BUT they still need to be completed and filed.
FinCEN 114 FBAR Report of Foreign Bank Accounts (FBAR)
Form 8621 Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
Form 8938 Statement of Specified Foreign Financial Assets
Form 5471 Information return of US persons with respect to certain foreign corporations
Form Treaty-Based Return Position Disclosure Under Section 6114 or (b)
Form 3520 A & Form 3520 Foreign Trusts with US owner

14. FinCEN 114 FBAR Report of Foreign Bank and Financial Accounts
This is an informational form listing out the details of all non-US financial accounts and their highest balances during the year
Some accounts included are:
Bank accounts (incl GICs), brokerage, TFSA, RESP, RRSP, life insurance with cash value
Complete form and file if:
Total value of non-US accounts equal or > $10K any time during the year

15. FinCEN 114 FBAR Due Date – to be received by June 30th
Online filing required using BSA (Bank Secrecy Act) e-filing system
– paper forms rejected
Online help phone number –
This form is not sent to IRS
Penalties
Up to $10K per violation
Possibly nothing if a good reason is given
Wilfully not filing can be larger of a)$100K or b) 50% of balance at time of violation plus criminal penalties
Report of Foreign Bank and Financial Accounts

16. FinCEN 114 FBAR Report of Foreign Bank and Financial Accounts
Information to have when filing FBARs
Bank name & address
Account # & whether it is jointly held or separate
Type of account – chq, brokerage, other (RRSP)
Highest balance in account during tax year (US $)

17. Forms to include with US tax return
Information Return by a Shareholder of a Passive Foreign Investment Company (PFIC) or Qualified Electing Fund
PFICs are defined by test
Non US corporation > 75% of income is passive or > 50% of assets are passive
This captures Canadian Mutual funds and ETFs
One form per PFIC per year, filed with tax return (1040)
Can be higher tax rates on included income amounts
Accuracy penalty is doubled when associated with understatement of PFIC tax

18. Forms to include with US tax return
Form 8938 Statement of Specified Foreign Financial Assets
This is an informational form listing out the details of all non-US financial assets, their highest balances during the year and income earned
Complete & File form if:
filing status is ”single” AND financial assets >$200,000 on the last day of the tax year or more than $300,000 at any time during the tax year; threshold doubles for MFJ
Due Date : Form is due with tax return
FATCA compliance
Treasury Reporting Rates has 1$ US = Can as at Dec 31, 2015

19. Form 8938 Statement of Specified Foreign Financial Assets cont’d
Assets to be reported include:
All financial accounts FBAR items
All other assets, such as notes, bonds, trust interests, stock of foreign companies, partnership interests
Assets not included are :
CPP & OAS
Direct interest in real estate

20. A look at foreign reporting…
Canadian T1135
Foreign Income Verification Statement
Filed separately from tax return
Based on cost of foreign assets; total assets > $100K cost
Report income earned on foreign property
Includes real property
Penalties - $25 per day (minimum $100 and maximum $2,500).
US Form 8938
Statement of Specified Foreign Financial Assets
Filed with the tax return
Based on FMV of assets; differing thresholds
Report income earned on foreign property
Does not include real property
Penalties - $10K + $10K for each month past 90 days after notification (to $50K max)

21. Informational forms Form 5471
Information return of US persons with respect to certain foreign corporations
This is an informational form that will report the details of your ownership interests in foreign corporations (one form for each corp). Your ownership or amount of control will dictate the amount of information you need to provide.
Who files:
US person or resident who owns or acquires 10% or more of foreign corporation
US person that has control of foreign corporation

22. Informational forms Form 5471
Information return of US persons with respect to certain foreign corporations
Self employed that are incorporated complete this form
Dormant corps still need to file
“Filed pursuant to Rev. Proc for Dormant Foreign Corporation “ (type in top margin of first page)
Due Date - due with income tax return
Penalties
$10K + $10K for each month past 90 days after notification (to $50K max)
10% (plus) reduction in foreign taxes used for foreign tax credits

23. Informational forms Form 3520 A & 3520
Foreign trusts annual return and transaction reporting
Form 3520 A is an informational annual return filed by the trust / trustee giving details (non US trust with US owner / beneficiary)
Form 3520 is used to report transactions that occurred in the trust during the year – filed by the individual
Form 3520 is also used to report receipt of foreign gifts:
Gifts or bequests valued at more than $100 K from a nonresident alien individual or foreign estate or
Gifts valued at more than $15,601 ( 2015) from foreign corporations or foreign partnerships

24. Informational forms Form 3520 A & 3520
Foreign trusts annual return and transaction reporting
TFSAs and RESPs are reported using these forms
Due Date
3520 – same as income tax return but do not mail with your return.
3520 A – 15th day of 3rd month after year end
Mailed to a separate address, do not attach to tax return
Penalties
Form 3520 – greater of $10K or b) 35% of gross distributions / contributions
Form 3520A – greater of a) $10K or b) 5% of gross value of assets owned by US person

25. FATCA Foreign Account Tax Compliance Act
US law aimed at the reporting of Foreign Financial Assets. One focus is the reporting by Foreign Financial Institutions in regards to accounts held by US citizens and another focus of the laws is the self reporting by US taxpayers about their foreign assets.
Enforcement of some pieces of law (withholding) extended to Jan 2016
Foreign Financial Institutions (FFI) are required to enter into agreements with the IRS to provide this information or face a 30% withholding tax on payments going out of the US to the institution
The FFI will need to get a waiver signed by the account holders
Form 8938 is part of FATCA – the part that the individual is most familiar as this is where foreign assets are to be reported

26. For those who haven’t been filing US returns
There is basically two options:
1. Streamlined Foreign Offshore Program or
2. Offshore Voluntary Disclosure Program (OVDP)
One or the other can be chosen, but not both

27. For those who haven’t been filing US returns Streamlined Program
This option is aimed directly at those that are outside of the US, haven’t been filing their US returns or FBARs and want to become compliant.
This option allows you to get caught up (in compliance) by filing
3 years worth of tax returns & informational returns
6 years worth of FBARs
No penalties or other enforcement
Taxes and interest will apply
No protection from criminal prosecution

28. For those who haven’t been filing US returns Streamlined Program
To qualify:
have lived outside US for 330 days (in 1 or more of last 3 years)
Failure to file is due to non-willful conduct
Once you submit under this Streamline option, OVDP is no longer available

29. Unlike prior programs there is no deadline for disclosure
For those who haven’t been filing US returns Offshore Voluntary Disclosure Program (OVDP)
The whole point of the program is to get taxpayers that have undisclosed foreign accounts or entities back into compliance with the IRS and US law by reporting these accounts knowing ahead of time the penalties that will be imposed
Unlike prior programs there is no deadline for disclosure
2012 program updated July 2014
Submission requirements is far greater than streamline option
Penalty is 27 ½ % ( to 50%) of highest balance of foreign entities / accounts or asset value during the disclosure period
All undisclosed accounts are added together & the highest balance found throughout the 8 year period will have penalty applied
This is in addition to tax, interest and accuracy penalties

30. Estate and Gift taxes ………. a few words
Basically if you are a US citizen, a permanent resident of the US, or just someone with assets situated in the US, you should be aware of the US Estate Tax rules and exemption amounts.
Estate tax will apply to a US citizens’ (and perm US resident) worldwide taxable estate.
Exemption amount $5.43 million (for 2015)
The US Estate Tax Return (Form 706) must be filed if  
1) the gross estate which is FMV at the date of death  (plus gifts & specific exemptions) is greater than the $5.43 million (2015)  OR
2) if the executor wants to transfer the Deceased Spousal Unused Exclusion (DSUE) to the surviving spouse

31. Estate and Gift taxes ………. cont’d
In regards to the Estate Tax - for federal tax purposes, the IRS recognizes same-sex marriages that are valid in the state where they were entered into, regardless of the married couple’s residence
you can transfer unlimited amounts, estate tax free to your US spouse/ US resident spouse
Estate tax is graduated and after $1 million is 40% 
Due Date for return – 9 months from date of death
6 month extension is available

32. Gift taxes
Gift tax is another part of the Estate Tax – without it you could give away all your assets prior to death and be left with no estate to tax.
Each US citizen can gift a maximum $ 14,000 (for 2015) to multiple individuals without having to report for gift tax purposes
these annual exclusion amounts won’t count against your lifetime exemption amount
Medical & tuition amounts paid directly (by gifter) can be excluded from gifts
Gifts to US citizen spouse is not limited; gifts to non-US citizen spouse has annual exclusion amount of $147 K ( 2015)
Lifetime gift exemption is  $5.43 million (2015)
Tax Return is Form United States Gift (and Generation-Skipping Transfer) Tax Return
Due Date is April 15th the following year
Extensions available, and automatic with federal income tax extension

33. US tax bits Individual States are not party to the US/CAN tax treaty
IRS does not mail out Notice of Assessments or letters indicating return has been received or processed
Some scenarios require the US return be paper filed
Extensions are available for most returns (federal)
Depreciation on buildings is not the option it is in Canada
If your living in Canada, Soc Security should be taxed in Canada – not the US and
15% of SSN is not taxable at all

34. Resources Path to Offshore Voluntary Disclosure
Path to Streamlined Program Procedure option
Filing-Compliance-Procedures
Path to Foreign Currency exchange rate

35. Resources Taxpayers with AGI< $62K can e-file for free
Use IRS link to “freefile”
IRS site has free fillable forms available to everyone
Software is available to help you prepare & e-file
Make sure it accommodates a foreign address

36. That’s it….done! Presented by : JPS Financial and Accounting Servicesph
205 – 2248 Elgin Ave
Port Coquitlam, BC