U.S. citizens living in Canada: Know your essential U.S. taxtypes and obligations

Over time, there there were plenty of posts written reminding U.S. citizens living in Canada toannually file a U.S. 1040 tax return in addition to the FinCEN Report 114, Report of Foreign Bankand Financial Accounts (FBAR). While the U.S. 1040 and FBAR are key records most U.S. ex patsmust complete, there are other U.S. tax filings that sadly and all too frequently, are missed or notfiled properly. Plenty of these missed tax filings relate with U.S. citizens residing in Canada whoown/have an interest in Canadian companies or unlimited liability businesses, Canadianpartnerships, Canadian trusts, RESPs and TFSAs or even possessors of Canadian traded mutual-funds or ETFs in a a non-retirement account.

Here are seven essential forms to know about that in many cases are missed by U.S. tax filers livingin Canada:

Form 5471: Information return of U.S. individuals with respect to certain foreign corporations

This form is submitted by any U.S. man who's more than a 10% direct or indirect shareholder in aforeign corporation or any U.S. investor in a controlled foreign corporation (CFC), which broadly isan international company, more than 50% that is possessed by U.S. individuals. A U.S. citizen orresident who's an officer or manager of a foreign company may also have a filing requirement if aU.S. man acquired stock in a foreign corporation. So, for example, should you or your businesspossesses a company in Canada, then you may want to file this form otherwise the penalty for notfiling could not be as low as $50, 000

Form 926: Filing requirement for U.S. transferors of property to a foreign corporation

Any U.S. person who transfers property to a foreign company and owns more than 10% of the stock,or any quantity of stock if funds transferred is more than $100,000, must file this form with his orher U.S. tax return. This form would implement, for instance, if a U.S. person simply was to givecash in exchange for stock to to make a wholly owned foreign corporation.

Form 8865: Return of U.S. individuals with respect to certain foreign ventures

This type must be filed with a U.S. man whopossessed more than a-50% interest in aforeign partnership during the year orpossessed at least a-10% interest if thepartnership was controlled by U.S. personsowning a 10% or higher curiosity. A U.S. manalso has a filing requirement if he or shecontributed property in exchange for apartnership interest if that person directly,indirectly or constructively owns at least a-10% curiosity, or the worth of the propertygiven exceeds $100,000.

Form 8858: Information return of U.S. menwith respect to foreign disregarded things

A U.S. individual that directly, indirectly or constructively possesses a foreign disregarded entity(FDE) should file this form. A FDE is an entity which is not created or organized in America andthat's disregarded as an entity separate from its owner for U.S. tax purposes. For instance, onemember Unlimited Liability Company in Canada possessed by a U.S. individual would trigger filingthis form.

Form 3520-A/3520: Annual information return of foreign trust with a U.S. owner

Form 8621: Information return by a stockholder of qualified electing fund or a passive foreigninvestment company.

Any interest in an overseas "passive" corporation (50% or more of its assets produce passive incomeor 75% of its income is inactive) should be reported with this form. This type of investing includesother problems such as whether to create a mark-to-market or qualified electing fund election, andafterwards how income and gains are taxed. As we discussed in a previous article, even owningshares in a Canadian mutual-fund or Exchange Traded Fund (ETF) could trip filing this type.

A foreign trust with a U.S. operator, which can occasionally include foreign pension plans,Registered Education Savings Plans (RESPs) and depending on how you might interpret the IRSLaws, Tax Free Savings Accounts (TFSAs), should file this form independently with the IRS byMarch 15 following the year to which it links. Additionally, if your supply or other payment isreceived in the trust, Type 3520 may be required (and must be submitted with the citizen's tax-return). Failure to file these forms subjects the U.S. owner to an initial fee equivalent to the greaterof $10,000 or 5% of the gross value of the trust assets considered possessed by the U.S. man at theclose of the tax year.

Form 8938: Assertion of foreign financial assets

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As a U.S. tax filer, it is very important that you completely disclose all of your global financial

interests to your U.S. tax preparer, so that they've a complete understanding of your financial affairsand can properly address all of your U.S. tax filing obligations. Failure to file the above mentionedU.S. tax types can lead to large non-compliance fees. Additionally, be sure you constantly work usingan experienced preparer for example a U.S. Certified Public Accountant (CPA) or an Enrolled Agentwith the Internal Revenue Service who has a complete comprehension of Canadian and U.S. taxregulations and has expertise servicing U.S. citizens residing in Canada. At Cardinal Stage, we focuson assisting U.S. citizens living in Canada with their complicated cross-border tax filings and fiscalplanning challenges.

A U.S. person must file Kind 8938 if they're a given individual who has an interest in specifiedforeign monetary assets and the worth of those assets is more than the applicable reportingthreshold. If they have been reported on one of the forms listed previously, such as the 8891, 3520or 5471 some assets usually are not needed to be individually listed. Starting with 2013, U.S. entitieswill be required to file this type as well as individuals.