If you were born in Canada, you don't have to worry about reporting anything to any other country outside. But if you live in Canada but were not born here, you may have to look somethings up. Canada is the second most favourite place to live for Americans after Mexico. There are around 1 Million US ex-pats who currently reside in Canada. The only problem is many ex-pats have to report their income on a US tax return while living in Canada. They don't have a very clear idea about it.People who have moved from the US to Canada often seek assistance with tax returns in the early stages of their relocation. Early assistance in this regard can be really beneficial in the longer run. Because at this stage, things are not very complicated.Once you are settled in Canada and start all your work for which you moved and the income starts, you will have difficulty keeping up with the process. However, Canadians are fortunate that many professional accounting and tax guide firms can help the tax filers. It is much better to hire an accounting firm for your US tax returns than to handle them independently. The question is, how can you report the income that you have in Canada on a US tax return? Read on to know all about it.
Form 1040
If you are living in Canada, you may have already heard the name of Form 1040 quite often. Form 1040 is the way you report your Canadian income to the US tax return. And how do you use this form? It's really simple if you have already hired an accounting firm. But if not, here is how you do it.If you move to Canada at the start of the year, you already get a filing extension till June 15th. And if you have not been able to prepare your files, you can get a further extension until October 15th. The best way to deal with Form 1040 is to use US dollars for all the transactions. Although it is not compulsory by IRS, it does make things easier when you use US dollars every time filing your taxes. Form 1040 has the main section where you need to report all your income in Canada. The other sections and schedules are for other purposes. Your interests and dividends go into schedule B of Form 1040. And the business profits need to go in schedule C of the same form. And if you have any rental income, you are going to utilize schedule E.
Other Forms Required for US Tax returns
There is an annual duty that you also have to fulfill living in Canada. Whether you have moved from the US for a job or a business, if you have investment accounts or even a bank account in Canada, you need to report it to FBAR (Foreign Bank Account Report). The form that will be used in this process is known as FinCEN Form 114. This reporting is annual and cannot be ignored.When filing federal tax returns, American ex-pats with over $200,000 assets outside the US have to report it through Form 8938.
The Take-Away
There are many more complications that you need to have a look at when filing US tax returns. It is therefore recommended to get through the process by hiring an accounting and Tax guide firm. They can make it effortless for you, and you will never be in trouble with IRS ever. for more details, you can also visit our website or contact us anytime.