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US Tax Filing Requirements for Canadians

US Tax Filing Requirements
US Tax Filing Requirements for Canadians

Canadian individuals who live or work in the United States may find themselves subject to US taxation to the extent they earn US source income or meet US tax residency requirements. We have created a list and a summary of most commonly used IRS forms for Canadians filing US taxes.

If you are above the required income filing threshold, then you will be required to complete IRS Form 1040 or 1040NR, depending on your status in the United States. The bulk of your annual US income tax filings will be comprised of additional forms and/or schedules.

 

If you do not have an Individual Taxpayer Identification Number (“ITIN”) or Social Security Number (“SSN”), you would need to apply for an ITIN in order to file your US tax return. ( ITIN Services )

 

If you would like to discuss with us your specific situation and understand whether or not you are required to file a US tax return, please contact us at 1-844.829-3678.

 

Canadians in the United States

 

Provided you’re not a US citizen, a Green card holder, or otherwise do meet the US tax residency requirements (such as substantial presence test), you are generally exempt from US taxation. However, that may change quickly if you earn any US source income or otherwise work or provide services in the United States.

 

If you perform services in the United States for a Canadian employer, you may be exempt from US tax and corresponding US tax filing requirement, if:

 

• Your total compensation does not exceed US $3,000 in the aggregate;

 

• You spent in the United States not more than 90 days; and

 

• You were compensated by a Canadian employer that is not engaged in a trade or business within the United States.

 

The Canada-US income tax treaty contains further exemption for those individuals – residents of Canada – who meet the following requirements when performing services in the United States:

 

• Your US employment income does not exceed US $10,000;

 

• You are present in the United States for less than 183 days in any 12-month period beginning or ending in the fiscal year concerned, and your remuneration is not paid by, or on behalf of, a person who is resident in the U.S and is not borne by a permanent establishment in the United States.

 

If you do not meet either of the above, you may be required to file a US tax return and pay US federal and, if applicable, state income tax on your US-sourced wages. Note that you must file a treaty-based return to rely on the applicable Canada-US income tax treaty provisions.

 

Another typical scenario when a Canadian may be required to file a US tax return is when she/he sells US real property and needs to file a US tax return to report the sale and to claim a refund of overwithheld US taxes, if applicable.

 

One more common reason for filing a US tax return, even when not required, is the recent demands by the Canada Revenue Agency (“CRA”) to present proof of ultimate tax liability in order to allow foreign tax credit claimed on a Canadian’s tax return with respect to taxes paid in the United States (both at a federal and state and local levels).

 

We are highly qualified US tax advisors and have the ability to pull transcripts of account online and present the respective transcripts as proof of the taxpayer’s ultimate tax liability to respond to the CRA’s demands for such proof.

 

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What IRS Forms May Need to be Filed?

 

1040 – U.S. Individual Income Tax Return

 

This is the standard federal income tax form used to report an individual’s gross income (e.g., money, goods, property, and services). Form 1040 allows taxpayers to claim numerous expenses and tax credits, itemize deductions, and adjust income. Form 1040 is filed by US persons that include US citizens, Green card holders, or residents for US federal income tax purposes.

 

1040NR – U.S. Nonresident Alien Income Tax Return

 

A nonresident alien is an alien who is not a US citizen, has not passed the green card test or the substantial presence test. If you are a nonresident alien involved in a trade or business within the United States, you must pay US tax on the amount of your effectively connected income with such US trade or business.  However, if your US income is less than the personal exemption amount, you do not need to rely on the applicable provisions of the Canada-US income tax treaty, or if proper US tax withholding took place, you may not be required to file US tax return.

 

Form 8833 – Treaty Based Return Position Disclosure

 

Form 8833 is required to be filed in case you are relying on the Canada-US income tax treaty provisions to be exempt from US tax or to reduce applicable US tax withholding. Late filing of form 8833 can lead to additional penalties. If you qualify for the exemption, you will need to file Form 8833 along with Form 1040.

U.S Tax IQ can make your US tax return filing process painless. We can help you by advising on US tax and cross-border tax issues, as well as by preparing your US tax return.