Canada and the U.S. came to an agreement this week that clears the way for Ottawa to share financial data about Americans living in Canada with the Internal Revenue Service. The deal addresses some of the privacy and hardship concerns Ottawa had with the Foreign Account Tax Compliance Act (FATCA), the controversial U.S. law targeting offshore tax evasion due to be implemented in 2015. With the agreement, many registered accounts will be exempt from the new reporting requirements, including registered retirement savings plans, tax free savings accounts, registered retirement income funds, and registered education savings plans. Tax experts warn U.S. citizens living in Canada to quickly get their tax filings up to date with the IRS. Read the full article here.
This article by Cardinal Point’s Terry Ritchie and James Sheldon discusses important new rules for U.S. taxpayers who hold Canadian mutual funds in non-registered accounts. The IRS recently released temporary regulations regarding Passive Foreign Investment Companies (PFICs). This act impacts nearly all Canadian mutual funds and Canadian-traded ETFs held outside registered accounts.
As a result of FATCA, U.S. citizens who hold PFICs must “file an annual report containing information as may be required by the Treasury Secretary,” which includes U.S. taxpayers living in Canada. They must file IRS Form 8621 and take one of two elections: Qualified Electing Fund (QEF) or Mark-to-Market Election. The new disclosure requirements may reveal U.S. taxpayers in Canada who haven’t filed IRS Form 8621 with their annual U.S. tax returns. U.S.- and dual-citizens in Canada are advised to discuss these issues with their advisors and prepare for the changes in tax compliance and any enforcement implications.
In the second part of this two-part series on advising snowbird clients, Terry Ritchie of Cardinal Point looks at four important items that should be on a snowbird’s checklist as they prepare to head south for the winter. First, get familiar with the residency requirements for healthcare benefits in your jurisdiction; some require specific minimum periods to be eligible for publicly funded health care when in Canada. Second, snowbirds should travel with a “border kit” that serves as proof that you’re a Canadian tax resident (click on the article link for specific documents to include).
Third, Ritchie warns against attempting to time the currency market when converting cash. If you plan to make the cross-border lifestyle a long-term situation, make sure you have U.S. dollars hedged for that purpose. Finally, review your estate planning situation, as Canadians who die owning more than $60K in U.S. real estate and securities held personally require the executor to file a U.S. estate tax return.
This article from Investment Executive features Cardinal Point’s Terry Ritchie and focuses on proposed legislation in the U.S. that would increase how long Canadian “snowbirds” can spend in the U.S. Under the Jobs Originated Through Launching Travel Act, snowbirds could stay in the U.S. up to 240 days per year (the current limit is 180 days). This proposed “retiree visa” is under consideration, so the limit is still 180 days.
Snowbirds should be aware of other restrictions and regulations that may impact them, including tax obligations. Under the”substantial presence test,” they may need to file an income-tax return with the IRS. Snowbirds should also be aware that U.S. income, including renting or selling U.S. property, may change their taxable status. In addition, they will soon be held more accountable for their visits, as Canada and the U.S. will implement a plan in June 2014 giving both governments easier access to information on when travelers enter/exit both countries. Get all the details in the full article found here.
This article looks at families who are faced with the prospect of a cross-border move and career changes. Featuring the commentary of Cardinal Point’s Terry Ritchie, it presents a case study to show the potential tax, retirement and estate planning implications of a cross-border move. In the scenario, a hypothetical family from Ottawa is faced with the father’s possible layoff and the mother’s potential job transfer to Texas. The couple also has retirement and education savings considerations. The case study was originally presented at the IAFP Symposium and is intended to show advisors how short-term, retirement and family goals can be managed concurrently.
The article evaluates the family’s three options and the issues and advantages that arise with each. It compares the tax impact and housing markets in Ottawa and Texas, as well as the compensation and employment benefits of each scenario. Ritchie comments on the impact that a move to Texas would have on the couple’s registered account, their unrecognized registered assets, and company savings, as well as what would happen if the family eventually returned to Canada.