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Advising same-sex couples with U.S. ties

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Terry Ritchie, Director of Cross-Border Wealth Services, was recently featured in an article from Advisor.ca looks at how a recent ruling from the U.S. Supreme Court opened the door to new planning options for same-sex partners with ties to the U.S. The June decision struck down a key part of the Defense of Marriage Act and broadened the federal definition of marriage to include legally married same-sex couples. The new definition also applies to American couples who marry outside the U.S.

Following the decision, the IRS released the tax implications: “Same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor.” The article goes on to give examples of how advisors can help their clients benefit from these changes, specifically in the areas of tax filing, wealth transfer, and principal residence exemption. Read the full article here.

Americans Abroad Have Opportunity to File Previous Years U.S. Tax Returns

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This article from Cardinal Point’s Terry Ritchie highlights another opportunity for Americans abroad to voluntarily pay their U.S. taxes. The IRS is introducing improvements to two offshore account compliance programs in an effort to get non-filing and non-reporting expats to file U.S. tax returns, foreign bank reports and other IRS compliance forms from previous years. Since the first program’s inception, the IRS has collected $6.5 billion in taxes, interest and penalties from 45,00 taxpayers.

Program improvements include the elimination of the questionnaire and $1,500 threshold for the current Streamlined Program. Taxpayers must instead certify that failure to meet past filing and reporting obligations was due to “non-willful conduct.” In addition, Offshore Voluntary Disclosure Program (OVDP) changes include the elimination of the reduced penalty percentage for some taxpayers and a new requirement to submit all account statements. To read the full article and access more information on both programs, click here.

U.S. and Canadian border services to collect biographical data

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This Investment Executive article offers a reminder that a new set of U.S.-Canadian border rules will soon be enforced, which could lead to tax and immigration issues for Canadian snowbirds. It suggests that Canadian financial advisors caution their snowbird clients that overstaying the limit in the U.S. could result in U.S. tax residency status and potential problems when crossing the border. In the article, Cardinal Point’s Terry Ritchie warns, “If you’re not keeping track, or you’re fudging the number of days, you’re compromising all the good things you want to go down there for.”

When visitors enter and exit at all border crossings starting on June 30, U.S. and Canadian border services will collect biographical data. This will provide both sides of the border with definitive information regarding residency, instead of relying on visitors to self-report. The number of days an individual spends in the U.S. is an important part of the U.S. “substantial presence” test (SPT). Those who meet the SPT may be considered U.S. residents and may be subject to U.S. income and gift taxes. To learn more about the formula behind SPT, read the full article here.

Terry Ritchie and James Sheldon in Institutional Investor

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This article from Institutional Investor features the commentary of Cardinal Point’s Terry Ritchie and James Sheldon. It highlights why the U.S. is increasingly a low-risk haven for wealthy families seeking to escape turmoil in emerging markets.

The U.S. Treasury Department has income tax treaties, protocols and tax information exchange agreements in place with 40 jurisdictions, including Canada. Ritchie comments that U.S. and Canadian officials have been working closely to streamline the exchange of tax information. “It’s an increasingly complicated process of dealing with property and passive income issues, and it is only going to become harder as more new regulations come into play,” says Ritchie.

Some families couple their desire to hold assets abroad with a desire for legal residency. More upper-class families in emerging-markets nations are seeking investment-qualified immigration status to enable adult children to live and work in the U.S. while also keeping assets out of reach of home governments. Sheldon comments that such practices boil down to buying a green card: “I don’t really have faith in the nature of qualifying investments in many of the cases that we have seen.” To read the full article, click here.