Tag Archives: Canada income tax

Tax Season is Here

Today I interviewed by phone for a tax preparation job in Vancouver. It was with an accounting company. I do not know if they will offer me a job or not. The job was preparing T1 returns. They did not seem to be interested in my experience preparing 1040s.

US taxes are much more complex than Canadian taxes. This is because individual US legislators can add complexities to the tax code. This is usually done to provide a benefit to either a campaign contributor or a constituent. In Canada only the Finance Minister can add a complication.

The US taxes their citizens no matter where in the world they live. The only other country that does this is Eritrea. The US provides a system of deductions for earned income in other countries.

I have only ever seen 2 US citizens living in Canada who had to pay US tax after figuring their Canadian taxes. This is because they can treat their Canada Pension Plan and Employment Insurance as taxes. The only ones who have to pay are usually only in this category because they have made a capital gain that is taxable at a higher rate in the US.

If you want a price quotation give me an idea of the type and number of information slips. If you have financial accounts outside the US and the maximum value of these accounts is more than 10,000 I need to know how many of these accounts you have.

If you want to send me your job to do, do not send originals. Send only copies. Better yet, instead of sending me copies, use your printer-scanner to make images, then send me the images attached to an email. This simplifies the whole process.

I will prepare the returns and send them back to you as PDF files so that you can print them out, sign them and send them in. I can efile Canadian returns now. I hope to be able to efile US returns in late March but it is not possible to determine when the IRS will give me permission. It is to their advantage to have forms efiled because it means that they do not have to input them manually. I should note here that the Canada Revenue Agency charges tax preparation firms $25 per return for handling paper returns unless the firm prepares only a small number of returns.

It is very important to determine if your financial accounts outside the US add up to 10,000 or more. For this purpose take the maximum value that each account had during the year. Often if you take out a loan the loan amount appears in your checking or savings account for only a few minutes but this still counts for determining the limit.

If the total of the maximum value of each account comes over 10,000 then you need to include every financial account that you have signing authority for, even tiny ones like your gardening club, your kid’s Boy Scout troop, or anything like that.

All Ready for Tax Year 2015

I am finally ready for Tax Year 2015. All that is left is to connect to the FBARs. For some reason this is slow this year.(but see below)

I do both Canadian and US tax returns, and of course I do returns for taxpayers who have to file in both countries. There is a tax treaty that determines which country gets to tax which income. This is important in cases where a person gets income from both countries in any one year, or when a US citizen is working or living in Canada.

If you want a price quotation give me an idea of the type and number of information slips. If you have financial accounts outside the US and the maximum value of these accounts is more than 10,000 I need to know how many of these accounts you have.

If you want to send me your job to do, do not send originals. Send only copies. Better yet, instead of sending me copies, use your printer-scanner to make images, then send me the images attached to an email. This simplifies the whole process.

I will prepare the returns and send them back to you as PDF files so that you can print them out, sign them and send them in. I can efile Canadian returns now. I hope to be able to efile US returns in late March but it is not possible to determine when the IRS will give me permission. It is to their advantage to have forms efiled because it means that they do not have to input them manually. I should note here that the Canada Revenue Agency charges tax preparation firms $25 per return for handling paper returns unless the firm prepares only a small number of returns.

It is very important to determine if your financial accounts outside the US add up to 10,000 or more. For this purpose take the maximum value that each account had during the year. Often if you take out a loan the loan amount appears in your checking or savings account for only a few minutes but this still counts for determining the limit.

If the total of the maximum value of each account comes over 10,000 then you need to include every financial account that you have signing authority for, even tiny ones like your gardening club, your kid’s Boy Scout troop, or anything like that.

Preparing the statements for these financial accounts is sometimes more work than preparing the income tax statements. They need the complete street address of each financial institution, the account number and the maximum value of the account. I prepare two sets of statements with this information, one to go with your return and another to go to a different branch of the Treasury Department. There must be some logic behind this but I do not see it.

A couple of weeks ago I read that of all the taxpayers who are eligible to receive education credits on their returns only about 2 of every 3 actually make the claims. It is usually necessary to see what has been done in previous years because the American Opportunity Credit is only available for a limited time. The Lifetime Learning Credit has different restrictions.The credit is substantial. I do not know why so many taxpayers miss it. One possible reason is that many tax preparers do not want to take the time to go through the different possibilities so they do not ask about it.

If you are filing a 1040 or 1040NR and have pages and pages of stock transactions I can set up a direct connection between your broker and my software so that the information can be transferred directly. You do not have to tell me your trading password, you only have to tell it to Intuit.

Since writing the above I have found a solution for the FBARs. It took 2 20-minute phone calls to find out what the problem was. Somehow their system had decided that my account was inactive because I had not used it since last tax season. There are several places where they say that FBARs can only be submitted during tax season. I do not see why an account should be declared inactive when it is not used during a time period when it is not supposed to be used, but that is bureaucracy for you.

Please remember that the deadlines are April 15 and probably May 2 in Canada.

Getting ready for tax year 2015

I specialize in cross-border income taxes. There are believed to be about a million US citizens living in Canada and about the same number of Canadian citizens living in the US.

US citizens or green card holders need to file no matter where in the world they live unless their income is below the minimum. This minimum changes from year to year and depends on your age and family status. I should have the 2015 numbers sometime in January.

Canada only requires people to file for the part of the year that they are in Canada, and also for property, such as real estate, that they own when they are outside the country. When I was working for another agency the head man told me that the agency got Canadians the year that they moved to the US and again the year that they moved back to Canada. In those years they had to file in both countries. The returns work better if the two are prepared at the same time by the same person.

Since one or two years ago the IRS has taken the position that if you were legally married to anyone anywhere you are still married even if you live in a state that does not recognize gay marriage unless you have been divorced somewhere that accepts gay divorce. Canada is more open about it. They have accepted gay marriage and common-law marriage for many years. They have only accepted gay divorce since 2005. The agency head I mentioned above and I were talking to a gay client and the agency head told him that gay divorce was the next logical step to take. The first gay divorce was granted about a month later in Nanaimo, BC. Two lesbian women got married in 2003, separated in 2004, and divorced in 2005.

I have been informed that the software that I use for US taxes will be ready on January 14. It will allow me to get information from clients’ stock trading accounts and then place this information in their tax returns directly. Of course this will only be possible if the client decides to provide me with the necessary authorization.

It will still be necessary to look at the information very closely. Many small companies amalgamate with other companies, do consolidations, and change names frequently. These are often difficult to follow. This has been a very difficult year financially for small mining companies so I will have to be extra careful with these. Today I read that a company that was named after Isis, the Egyptian goddess, has had to change their name.

I will be able to efile Canadian tax returns as soon as the software for these returns is available, probably near January 14. My authorization for efile for US tax returns will not come until later in the year, probably near the end of March. Until then I will have to either send paper copies or pdf files of these returns to the client.

There are advantages of efiling returns. First of all, instead of sending paper returns and then having someone at Canada Revenue Agency or the IRS enter them into a program to produce a computer file, we simply send the computer file that we have produced. This decreases the problems caused by data entry errors. It also speeds up the process.

US citizens who live in Canada should not take out Tax Free Savings Accounts. The IRS considers these to be trusts and there is a big form involved. In one case they instructed me to take out an Employer Identification Number for a TFSA. This was for a $2000 bank account in Calgary. I could not imagine it having employees anywhere, especially not in the US, but this is what they asked for so it was what I provided. After making this application I told the client that it looked like we had been providing training for some new IRS employees.

It will still be necessary to file information on foreign financial accounts twice, to different branches of the IRS. I do not know why they want this information twice but we are stuck doing what they ask. The second set, which was due the end of June for many years, is now due at the same time as the main form 1040.

This is necessary if the maximum value of foreign accounts at any time in the year is USD 10,000 or more. This includes not only your own accounts, but any accounts for which you have signing authority, be they for a Boy Scout troop, a service club, a garden club or your child’s college fund. If money for something like a property purchase goes through your savings account and out again the same day this is counted as part of the $10,000.

Of course I would be happy to prepare your returns for you. If you want to send paper copies (I specifically mean copies, not originals) please write to me at dave@daves-income-tax-online.com to make sure that you have my correct address before sending them. If you are using your multi-functional printer to make the copies you can simply email me the images that your scanner makes so that I can print them out at my end instead of sending them through the mail or using a messenger service.

Recently I read that last tax season a USPS employee noticed that he or she was delivering hundreds of tax refund checks to one address. The IRS was notified. They had sent millions of dollars of phony refunds to the same address. I have no idea why their computers did not notice this, but as you should be aware an ordinary computer cannot do anything that its programmers did not include in its instructions.

The exception to this rule is Watson, the computer that beat human experts at playing Jeopardy. I have been granted access to Watson and will try to use it to predict the stock market. If I make a million dollars on the stock market using Watson’s predictions I will get out of the income tax preparation business and go into the business of decreasing my own income taxes.

That makes it pretty clear that I intend to stay in the income tax preparation business for a long time to come.