Canada is one of the largest economies with a good scope for growth. So, this country is highly receptive to foreign workers and immigrants. It is true that there are several cultural and economic similarities between Canadians and Americans. But, without eligibility, the Canadian government does not permit Americans to work in the country.
Like applicants from other countries, US candidates should have a work permit. Before moving to Canada, you can consult with a trusted consultant to learn more about these facts. However, we have now shared some tips for those US candidates who like to work in Canada.
- US candidates’ tax obligations to work in Canada
It is a misconception among expats that they do not have any tax obligations after moving to a different country. They do not know about the tax system in the USA. Americans who reside outside the US do not lose their citizenship in America. That is why they must not avoid the US tax report on annual income.
You have to report your earnings to the IRS and mention the source of your income (Canada versus USA)
- Report relevant information to the IRS
US candidates who think of getting employed in Canada have non-US accounts and assets. They have to fill up an informational form to fulfill requirements. Attach the form to your income tax return form, and submit them to the IRS. Other forms need to be submitted to respective governmental departments like USA Treasury. Any failure to file the forms may cause a big penalty. You may need to pay $10,000 as a penalty for the form per year.
- Ensure you know the way to file your US tax while residing in Canada
Several Americans in Canada feel confused while filing their taxes. But, a Canada expat tax consultant is the best professional to help them in this situation. The best professional will guide you in every step. You can also analyze your return before paying the amount.
- Learn about tax-free investments
Some tax-free investments in Canada may not let you stay free from tax in the USA. For instance, RDSR, RESP, and TFSA are tax-free options when you stay in Canada. But, US taxes will be imposed on your earnings. You have to reveal your account details to a foreign grantor trust.
- IRS has a higher reach due to FATCA
FATCA is one of the newly imposed laws to prevent offshore tax evasion cases. Americans have to reveal details about their international financial accounts. They should also disclose foreign assets that they have gained.
After implementing FATCA, IRS must maintain records of US citizens’ foreign financial resources. From foreign insurance agencies to investment houses, every organization should report its balances. As a US citizen working in Canada, you must comply with the tax rules.
- US tax benefits- Applicable to American citizens in Canada
There is one advantageous fact about expats residing in Canada for professional purposes. Provisions mentioned in US-Canada agreements and US domestic tax are in your favor. Some of them are foreign tax credits and foreign housing exclusion.
These special provisions reduce and may also remove US income tax. As an expat taxpayer, you will save money on your tax. Although you do not currently owe US tax, you have to file a US tax return. Until you have done it, you may need to pay financial penalties.
These are some important tips for Americans who dream of studying in Canada. There may be several other rules for Americans who like to continue residing in Canada for professional needs.