Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
A big thanks to Sybil Verch and the crew at the Wealthy Life for having us down for the show. Although the segment was relatively brief we were able to touch on a few key cross border tax and investment topics:
General Tax and Compliance Considerations for US Citizens in Canada
As many already know, US citizens are required to file US tax returns regardless of whether they live in the US. As such, American’s living in Canada will be required to file both Canadian and US tax returns on an annual basis. In addition to tax return filings, both Canada and the US require taxpayers to report foreign financial interests to each taxation jurisdiction. Examples of such compliance forms include FBAR form, form 8938 and T1135 for Canadian reporting.
General Cross Border Investment Considerations
Chris discusses the importance of reviewing your investable assets with a comprehensive approach rather than planning separately for Canadian and US purposes. Distinctions are made between registered investment accounts such as IRA, 401k and ROTH accounts in the US and Canadian plans such as TFSAs and RRSP accounts.
Some strategies discussed on the show included transferring the US accounts to a Canadian broker that can manage US assets and retirement accounts, and possibly transferring the US retirement accounts to an RRSP.
How US plans can “stretch” to Future Generations
Chris discusses the often overlooked benefits of US plans for Canadian residents. Under US tax laws IRA (and sometimes 401k) plans can be “stretched” or transferred to future generations tax free. Pursuant to Canada-US treaty provisions the same treatment can be had for Canadian tax purposes.
Unlike RRSP accounts, US IRA accounts can be transferred to a second generation (non-spouse) tax free under the Canada-US tax treaty. The impact of the tax free transfer and compounding investment over the lifetime of the beneficiary can be significant. This is outlined in detail in Chris’ new white paper report Roth IRAs in Canada – The gift that keeps on giving. How $250,000 can turn into $35 million TAX FREE to an heir.
Should you Have Both a Canadian and US Tax Accountant?
As discussed in the clip below, whenever possible it’s always a good idea to have one firm prepare both your Canadian and US tax returns. This allows for continuity throughout all the returns and the ability to plan from a cross border perspective. It’s possible to have 2 firms complete each individual return, however for most taxpayers this will be more of a hassle and potentially more cost to administer in the long run.
Once again, a big thank you to Sybil and the crew at the Wealthy Life for inviting us down to the studio to discuss these topis. We welcome anyone with questions about their cross border tax or investment situation to contact Phil Hogan or Chris Stooksbury for more information on how we can help.