U.S. citizens living in Canada: Know your key U.S. tax forms and responsibilities
Over the years, there have been a lot of articles written reminding U.S. citizens living in Canada to annually file a U.S. 1040 tax return 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. A lot of these missed tax filings relate to U.S. citizens living in Canada who own/have an interest in Canadian companies or unlimited liability corporations, Canadian partnerships, Canadian trusts, RESPs and TFSAs or even owners of Canadian traded mutual funds or ETFs held in a non-retirement account.
Here are seven key forms to be aware of that are often missed by U.S. tax filers living in Canada:
Form 8858: Information return of U.S. persons with respect to foreign disregarded entities
A U.S. person that 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 owned by a U.S. person would trigger filing this form.
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 or any U.S. shareholder in a controlled foreign corporation (CFC), which broadly 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 a U.S. person acquired stock in a foreign corporation. 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. Further, 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. Passive Foreign Investment Company, U.S. citizens living in Canada, Canadian and U.S. investment
Over the years, there have been a lot of articles written reminding U.S. citizens living in Canada to annually file a U.S. 1040 tax return 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. A lot of these missed tax filings relate to U.S. citizens living in Canada who own/have an interest in Canadian companies or unlimited liability corporations, Canadian partnerships, Canadian trusts, RESPs and TFSAs or even owners of Canadian traded mutual funds or ETFs held in a non-retirement account.
Here are seven key forms to be aware of that are often missed by U.S. tax filers living in Canada:
Form 8858: Information return of U.S. persons with respect to foreign disregarded entities
A U.S. person that 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 owned by a U.S. person would trigger filing this form.
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 or any U.S. shareholder in a controlled foreign corporation (CFC), which broadly 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 a U.S. person acquired stock in a foreign corporation. 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. Further, 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. Passive Foreign Investment Company, U.S. citizens living in Canada, Canadian and U.S. investment