Canadian Overseas Tax Preparation
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Foreign Property Reporting
Some common examples of Foreign Property that need to be reported are cash, stocks, bonds, mutual funds, loans or any real property (building or land) not in Canada. Foreign Property Reporting is done by filling out Form T1135 – Foreign Income Verification Statement.
You Were Outside Canada Temporarily
Last year I worked in the U.S. and earned W2 income of $100,000. My family and children stayed in Canada. I also earned T4 income of $50,000 Canadian. How do I file my taxes?
As your family and children are in Canada, you are considered a factual resident of Canada. Being a Canadian resident you are required to report your Canadian as well as U.S. income on your Canadian taxes. At the same time, you are also required to file U.S. tax returns. To prevent double taxation, you get a foreign tax credit on your Canadian taxes for the taxes paid in the United States. Since Canadian taxes are higher than U.S. you will have to pay the tax difference on your U.S. source income.
If You Are Leaving Canada Permanently
I have over $100,000 in RRSPs. Should I cash in my RRSPs before I move to the United States.
In most cases, it is advisable not to cash your RRSPs when leaving Canada. If you collapse your RRSPs while resident in Canada you will be taxed at your marginal rate for that year. The rate could be as high as 50%. If you wait until you move, lump sum withdraws will be taxed at 25%. If you leave the money in RRSPs until you convert it to a RRIF or an annuity than the Canadian rate drops to 15%.
Will I have to pay tax on CPP and OAS if I move to U.S.?
Under the Canada-U.S. tax treaty, CPP and OAS benefits paid to a resident of the U.S. are not subject to Canadian tax. You will have to report them on your U.S. 1040 tax return and depending on your total income you may have to pay U.S. tax on them. You are not subject to Canadian tax if you are not a resident of Canada. You may have to pay withholding taxes if you have investments in Canada.
For further questions call Softron at (905) 273-4444 or to learn more.
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