Whether you are a Canadian living in the US or an ex-pat American who lives in Canada, you have to file US Tax returns. As a responsible and law-abiding citizen, it is better to know all about it before it’s too late. There are several important things that you need to consider before you file your taxes to the IRS. The US government is one of the few governments that tax their citizens based on their international income even though they reside as permanent citizens somewhere else in the world.Here are a few tips for Canadians filing a US tax return.
Prepare Tax returns timely
Although it sounds like a given, many people miss this one out. If you have just moved to Canada and your income has not streamlined yet, you may not worry about the US tax returns. But you must understand the need to file US tax returns even if you don’t owe any taxes yet. Or, if your income has not crossed the tax threshold, you still have to file US tax returns to the IRS. This is the reason tax attorneys and other accounting firms do it way earlier for their clients. A proper balance and organized files are the key indicators that you will stay ahead on your taxes.
If you have missed the date, Do not delay it further
In many cases, it is very normal to miss the deadline for the filing of your returns. But does it mean you have to file it accumulated the next year? Certainly not. As you may know, you will be charged an extra 5% per month in case of delays, and if you compromise on some more months, it can reach up to 25% extra on an annual basis. Now here is the real good news for Americans living in Canada or those who have dual citizenship. IRS will not charge anything extra from you when you file your US tax returns. This relief means you should do it before the next due date so that you maintain a good record with your privileges.
Make the most of US and Canada Tax Treaty
Despite having many similarities between the operation of taxes, the US and Canada differ in one thing. As we already discussed, the US government will tax their citizens for their international income whether they live in the US or anywhere else in the world. While the Canadian government lets you earn tax-free as much as you want from anywhere in the world if you don’t live in Canada anymore. But for those with dual citizenship, it’s all good news that there exists a tax treaty between the US and Canada. This treaty ensures that you don’t have to pay double taxes. Suppose you are already filing a US tax return. In that case, you will utilize the same return report to exempt your Canadian taxes.
Final Thoughts
A lot more can be done and discussed about filing your US tax returns as a Canadian. It is better that you always consult a professional accounting or tax guide firm. They help you understand all the technicalities and difficulties of the process. They can assist you in preparing all the documents as well. And as a by-product, you will get many financial benefits too. for more details, you are free to contact the professional consultants at GTA Accounting.