This is a brief summary of some key considerations and due dates for your 2017 Canadian and U.S. individual income tax filings. Our firm also handles Canadian and U.S. corporate income tax filings and consultations.
Please feel free contact our office to schedule a consultation or ask any questions you may have.
CANADIAN TAX CONSIDERATIONS
- 2017 Individual income tax filing deadline is Monday, April 30, 2018.
- Canada Revenue Agency (CRA) will charge a penalty of 5% (of the taxes owing) if the tax return is filed after April 30th.
- 2017 Tax slips from employers (T4), and financial institutions (T3/T5) should start to arrive by mid-February 2018.
- The filing deadline for the Foreign Property Disclosure form is April 30, 2018, which is applicable to Canadian residents with U.S. assets costing $100,000 CAD or more.
- 2017 RRSP contribution deadline is March 1, 2018.
- Sole proprietors and their spouses have an automatic filing extension to June 15, 2018 but in order to avoid past due interest, any taxes owed must be paid by May 1st.
- Some home office expenses are deductible depending on your employment/self-employment situation. Employment expenses must be supported by Form T2200 signed by your employer.
- The threshold for collecting HST/GST from sale of goods and services to customers continues to be $30,000 per annum. Registration allows the business to deduct HST / GST paid to suppliers (known as ITCs or Input Tax Credits). Ask us about using the Quick Method for calculating HST owing – it could end up saving you money.
Foreign sourced income
- Full-time, permanent Canadian residents are taxed in Canada on their worldwide income. For some individuals, this might include foreign income such as pensions, employment, or rental income. Canada has entered into Tax Treaties with other countries which allow for the taxpayer to claim a ‘foreign tax credit’ or deduction from Canadian income taxes in regards to the taxes paid to the foreign country.
- CRA rules for calculating and supporting the foreign tax credit are somewhat complicated.
U.S. TAX CONSIDERATIONS
Generally speaking, all U.S. citizens and U.S. Green card holders, along with Canadians earning income in the U.S. must file U.S. income tax returns and other schedules every year. Please note that our firm can electronically process and e-file all of your U.S. income tax filings, except Form 3520 and 3520-A.
U.S. Citizens living in Canada
- The IRS views Canadian TFSA and RESP as ‘Foreign Trusts’, and as such requires completion of 3520 (due April 15, 2018) and 3520-A (due March 15, 2018). We recommend filing both forms by March 15, 2018.
- 2017 Form 114 (also known as FBAR) is due April 15, 2018. An extension to October 15, 2018 is automatically granted, but we strongly suggest adhering to the April 15h deadline. Form 114 filing is required if the aggregate value of all foreign financial accounts exceeded $10,000 USD at any time during the 2017 calendar year. Form 114 must be filed electronically. IRS may charge a $10,000 penalty for failure to disclose, or for late filing Form 114.
- 2017 Form 1040 and supporting schedules are due June 15, 2018 (includes automatic 2-month extension). IRS charges a late filing penalty of 5% if taxes owing. An extension to October 15, 2018 is available if Form 4868 is filed with the IRS by June 15th.
- Form 8938 Statement of Specified Foreign Financial Assets is required to report foreign financial assets if the total value is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year, or if you are married and you and your spouse file a joint income tax return, more than $400,000 and $600,000 respectively. Form 8938 is included with Form 1040 and is due June 15, 2018.
- 2017 Foreign Earned Income Exclusion is $102,100. Form 2555 details the exclusion for “earned income” which includes employment and self-employment income, but does not include pension income, interest income and other “passive income”.
- Form 8621 PFIC might be required for disclosing foreign mutual funds in some situations.
- Self-employment Tax (‘SE’ Tax) pertains to sole proprietor businesses and partnerships. SE tax can be a significant dollar amount. U.S. citizens living in Canada can claim an exemption for the SE tax but only if certified by the Canada Revenue Agency (or Quebec Pension Plan).
- Disclosure of ownership exceeding 10% of a foreign corporation, such as a Canadian Controlled Private Corporation (CCPC), is required on Form 5471. This information is gathered from the corporation’s financial statements.
- 2017 Standard deduction = $6,350 for single or married filing separately, $12,700 for married filing jointly, and $9,350 for Head of household.
- 2017 Personal Exemptions are $4,050 per person (yourself and each dependent).
Canadians with U.S. Properties
- Canadians with U.S. rental properties must file Form 1040NR (due June 15, 2018) and supporting schedules including Schedule E.
- Personal Exemptions are $4,050 per person for 2017.
- Disclosure of rental properties with Canada Revenue Agency on Form 1135 is required if the cost base exceeds $100,000 Canadian dollars for each owner.
- Canadians who sell real property in the U.S. are required to file Form 1040NR.
- Individual Tax Identification Numbers (ITIN) are required for Canadians filing U.S. Form 1040NR. Taxpayers must apply for an ITIN by submitting Form W-7 along with a certified copy of their passport or the original to the IRS. Our firm can assist with obtaining the ITIN.
We hope you have found this information useful. Please contact our firm to discuss how Edelkoort, Smethurst, Schein CPAs LLP can assist you with your U.S. and Canadian individual tax planning and filings. We look forward to hearing from you. Thanks for taking the time to read this article, and best wishes.
Edelkoort | Smethurst | Schein CPAs LLP is located in Burlington Ontario servicing the Golden Horseshoe and Greater Toronto Area and well beyond. The firm is fully licensed with CPA Ontario to provide assurance, tax and accounting services as well as registered as tax preparers with the Canada Revenue Agency (CRA) & Internal Revenue Service (IRS).
All blogs and articles published on this site are for informational purposes only and do not constitute professional advice. Readers should contact a professional to discuss their individual situation. Neither the author nor the accounting firm shall accept any liability for any reliance placed on the information posted.