US Corporate federal and state tax consulting and compliance – cross-border specialization
US Tax Services competently addresses the following common requests of Canadian corporations seeking planning or tax preparation for their US business:
Desire locally based US tax expert and do not want to “farm the work out” to the US.
Large international firms in the Canadian market area charge an “arm and leg” for US tax work and understandably their fees must be higher simply to cover such firm’s vast overhead for items entirely unrelated to US tax; we're looking for a knowledgeable provider who will only charge us for the actual work we request, will charge fixed fees (not hourly) for tax compliance and who invoices in Canadian dollars (versus Buffalo or other US firms who invoice in USD). Is there anyone local who is dedicated solely to US tax and no other accounting field meeting such criteria?
We need someone who considers our US tax needs to be important, who will pay attention to our company and will timely address communication between us. We don't want to be lost or ignored as a small client at a huge firm.
Can we find locally a US-trained CPA with extensive US tax experience in the cross border environment and not merely a local Canadian accountant who picks up bits and pieces of US tax knowledge in a hobby-like unstructured fashion?
Our company has a number of US tax and legal needs – is there one service provider who can arrange for all of our US needs?
Is there a US tax provider with existing clients earning primarily on Amazon, Apple and Google who can walk us through the tax, forms, withholding, traps for the unwary, structuring and income-sourcing issues specific to these industries?
We need to balance our overall cross-border tax strategy and address our US tax needs in a cross-border setting and context.
US Corporate federal and state estimated taxes and return extensions
US companies are generally required to calculate and make federal and state estimated tax payments. Also, Canadian companies often are unable to produce financial statements in time for the US tax filing due dates of their US operations and need to request extensions for the filing dates. The extensions extend the time provided to file the return, but not to pay taxes due and in addition to the tax filing paperwork, calculations are needed then to determine taxable income, and tax due, under US tax law.
State sales tax advice and form preparation
Canadian companies selling goods, services or products in the US are generally liable for state sales and use tax. There is significant tax form compliance that must be adhered to as well as ample opportunity for effective tax planning to reduce or eliminate the overall tax burden. More and more, Canadian companies are being audited and assessed by various states and often this scenario could have been entirely avoided h ad the proper planning and compliance been implemented from the start. Clients love our monthly flat fee arrangement whereby we completely manager and administer client’s state sales tax compliance requirements each month.
Sales of US condo/property OR rental income from US condo/property
Canadians often invest in US real estate, especially the condo market. There are IRS compliance requirements and tax savings opportunities that are associated with such ownership. With SALES, certain filings must be made with the IRS by the buyer within 20 days of the sale thus putting the IRS on direct notice that you were the seller and providing the IRS with your personal and contact information. The IRS expects certain filings to be made by you, the seller, and there is now no chance of your being overlooked by virtue of your residence in Canada because you have already been placed on the IRS radar screen by the buyer. Both the seller and buyer filings require a US taxpayer ID for the Canadian seller. The filing procedure changes for BOTH the seller and buyer whether the Canadian seller is obtaining a US taxpayer ID number at the same time that the sale related filings are made or later. Not complying properly can result in problems including excessive or unnecessary US tax being withheld from your sale proceeds. Let us help you successfully complete this process.
We can also assist with obtaining a refund, if applicable, of US taxes already withheld upon sale. These taxes are NOT sunk costs that are gone forever. Often, these withheld taxes can be partially or fully reclaimed for refund IF proactive timely action is taken to file a refund claim. Allow us to analyze your situation for you and to help you get back your money. If no action is taken, your withheld money is not returned and eventually it may become legally too late, due to statutes of limitation, to seek a refund of your sales proceeds money that was submitted to the IRS by your buyer.
With RENTALS, absent specific US tax planning and related filings that are not expensive to complete, your rental income will be subject to US tax and will be paid on your behalf, as required by law, by the renting party or property management company withholding 30% of your rental proceeds and forwarding this money to the IRS as a tax payment. Let us help you successfully transform this process in a way that eliminates or drastically reduces your US tax burden. Taking action to properly tax plan and report with regards to this particular point is one of the biggest no-brainers in the cross-border arena. The tax laws here are specifically designed to help your situation and alleviate your tax burden but you must initiate action or else you will be defaulted to the system that overtaxes you in comparison. The tax planning and compliance costs are low and are essentially self-funding since the annual savings you will reap should far outweigh the tax compliance costs.
Streamlined Sales Tax Project & Amnesty
There are numerous state sales and use tax issues and concerns that confront Canadian businesses that have expanded operations into the US market. These items can quickly escalate into serious issues for a company and even threaten economic volatility.
It is therefore imperative for companies to understand and ensure compliance with state sales tax laws, collections, filings, remittance, exemption qualifications and requirements. Even companies who for years presumed and understood that they were exempt have been alarmingly awakened by tax assessments asserting otherwise.
For companies seeking to become compliant, not only on a go-forward basis, but in a manner that addresses ignored historical requirements and minimizes liability exposure & penalization for voluntary disclosure, the Streamlined Sales Tax Project may be the perfect route to take.
While the program’s objective is to simplify and modernize sales and use tax collection and administration in the US, certain participating states under certain circumstances also offer amnesty "from assessment for uncollected or unpaid sales or use taxes together with interest or penalty for sales made during the period the seller was not registered in that state" – i.e., a clean slate of audit.
Almost all 50 states participate in some manner. There are a number of full member states such as: Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Vermont, West Virginia.
There are some associate member states such as: Arkansas, Nevada, Ohio, Tennessee, Utah and Wyoming.
The Streamlined Sales Tax Project is setting up a system by which Internet e-commerce companies can voluntarily pay state taxes to the states in which their customers reside. Member states will offer advantages to those sellers who use a certified service provider.
"Treaty-based returns" for Canadian corporations
It is commonly prudent for Canadian companies who own one or more US subsidiaries to file a “treaty-based protective filing” to protect themselves from potentially severe punitive measures the IRS is entitled to impose upon Canadian companies who didn’t file US returns because they thought they were exempt from US tax. Making this filing protects their ability in the future to avail themselves of allowable deductions, should the IRS determine that they have indeed been subject to U.S. tax.
Delaware filings and alternate franchise tax calculations to reduce tax
Although well known for its numerous income tax exemptions for corporations, Delaware does indeed impose a corporate income tax under certain fact patterns. Also, it may be somewhat typical that a Canadian company has expanded into the US through a Delaware holding company. Although often exempt from corporate income tax in that situation, Delaware still imposes a corporate franchise tax, which generally can be computed under two alternate methods. The two methods often result in drastically different amounts of tax due, typically with one method producing a nominal amount of tax liability and the other a high amount. Often the state assessment sent to the taxpayer has been computed under the default method that produces the higher tax result and this higher assessment will stand until proactively changed by the taxpayer via certain filings.
Please contact us for us to liaise and manage such work projects for you in conjunction with our designated external expert. We have aligned ourselves with an unaffiliated transfer pricing/valuations cross-border expert. We refer the transfer pricing work to this expert and become involved only to the extent that US tax expert knowledge is required on a project.
Before performance of transfer pricing work, some taxpayers are hesitant to initiate engagement of such work for lack of ability of foretelling its value. Between more stringent CRA & IRS requirements and ongoing taxpayer audits, time-takers and disallowances, this area has certainly attracted our attention and the need for high-level competent yet practical cross-border addressing of such concerns. It is because of these concerns that we have aligned ourselves with a transfer pricing expert who brings unique experience, credentials & effectiveness to this area at a high standard commensurate with our own self-demanding service level. Proper transfer pricing benefits far outweigh the cost of being caught off guard and offside of current requirements.
The following are items that concern us about you, and we challenge you to ask yourselves if they concern you as well and if you’d like to quell them.
Canada Revenue Agency has recently improved its screening, audit and dispute of inter-company transactions that taxpayers report on their “T106” forms and defend with their “contemporaneous documentation”. The Canada Revenue Agency continues to focus on companies that, after a series of transactions, restructure their business to reduce the income taxes paid in Canada on a go-forward basis.
Does your company’s General Ledger clearly identify all of the inter-company transactions needed for the T106? Do the details reconcile in the General Ledger for the provider vs. recipient entities? Does the inter-company price result in an equitable share of profits for the entities? Do the transactions need to be adjusted before closing the books for each entity? Can the existing documentation be updated (with less effort) for ongoing transactions?
There is a new concern for Canadian companies over the new US regulations for inter-company services and intangibles in full force effective since January 1, 2008. Have mark-ups for certain services and introducing royalties for certain intangibles been revised to comply? Awareness of the differences and disputes between the US and Canadian requirements.
Does your Cdn T106 jive with your US 5472? Does the transfer pricing agree with the income tax reporting? Do the US & Cdn income tax reporting agree with regards to intercompany transactions? Is income tax reporting in sync with customs and sales tax reporting? Have service components been properly segregated to ensure tax is paid only on taxable components and that tax isn’t overpaid merely because of contract term lumping?
Recent Internal Revenue Manual (IRM) identifying planned increased transfer pricing audit scrutiny by IRS
Ancillary US tax services
Obtaining corporate employer identification numbers (EIN)
Obtaining individual taxpayer ID numbers (ITIN)
Sales of US condo/property OR rental income from US condo/property
Canadians often invest in US real estate, especially the condo market. There are IRS compliance requirements and tax savings opportunities that are associated with such ownership. With SALES, certain filings must be made with the IRS by the buyer within 20 days of the sale thus putting the IRS on direct notice that you were the seller and providing the IRS with your personal and contact information. The IRS expects certain filings to be made by you, the seller, and there is now no chance of your being overlooked by virtue of your residence in Canada because you have already been placed on the IRS radar screen by the buyer. Both the seller and buyer filings require a US taxpayer ID for the Canadian seller. Obtaining individual taxpayer ID numbers (ITIN) The filing procedure changes for BOTH the seller and buyer when the Canadian seller is obtaining a US taxpayer ID number at the same time that the sale related filings are made. Not complying properly can result in problems including excessive or unnecessary US tax being withheld from your sale proceeds. Let us help you successfully complete this process.
We can also assist with obtaining a refund, if applicable, of US taxes already withheld upon sale. Many think these taxes are sunk costs – gone forever. Often, this is not the case and these withheld taxes can be partially or fully reclaimed for refund IF proactive action is taken to file a refund claim. Allow us to analyze your situation for you and help you get back your money. If no action is taken, your withheld money is not returned and eventually it may become legally too late, due to statutes of limitation, to seek a refund of your sales proceeds money that was submitted to the IRS by your buyer.
With RENTALS, absent specific US tax planning and related filings that are not expensive to complete, your rental income will be subject to US tax and will be paid on your behalf, as required by law, by the renting party or property management company withholding 30% of your rental proceeds and forwarding this money to the IRS as a tax payment. Let us help you successfully transform this process in a way that eliminates or drastically reduces your US tax burden. Taking action to properly tax plan and report with regards to this particular point is one of the biggest no-brainers in the cross-border arena. The tax laws here are specifically designed to help your situation and alleviate your tax burden but you must initiate action or else you will be defaulted to the system that overtaxes you in comparison. The tax planning and compliance costs are low and are essentially self-funding since the annual savings you will reap should far outweigh the tax compliance costs.Hide
Entity classification filing, e.g., "check-the-box" corporations
Assistance with responding to US Federal & state tax notices and achieving penalty abatement
Preparation of forms/vouchers for tax payments
Preparing and advising on reporting compliance for cross-border US withholding tax
Resolving federal tax issues and records with the IRS and/or states
IRC Section 163(j) calculations and projections relating to deductibility of interest expense paid by a US company to a related party in Canada, also known as, the "earnings stripping" rules.
Analysis of debt versus equity characterization and related planning
Planning to reduce or eliminate income arising from forgiveness of debt
Setting up in the US – state business registrations & opening a US bank account
Review of tax consequences in Canada of repatriating profits from the United States
Often, one of the issues at the forefront for Canadian companies conducting business in the US is how to bring back to Canada profits earned through US operations in a manner that is most tax efficient and that considers the complexities involved in cross-border movement of payments.
Review of state sales tax and income tax (nexus) implications
Canadian companies are sometimes unaware of the myriad of state taxes imposed and even when aware that such tax is imposed, the implications and tax exposure is many times overlooked or unknown. Canadian companies seeking to comply with US state tax obligations often need assistance in determining the precise requirements and exposure that exist for their particular company as well are interested in learning what tax and legal planning steps may be implemented to safely curb or even eliminate such exposure.
Flat fee arrangements for entire sales tax monthly compliance needs
Compliance with state sales tax is a cumbersome task that is recurring on a monthly basis. Rules and compliance procedures vary from state to state. Often, Canadian companies do not have adequate dedicated, or do not feel it cost-beneficial to assign, human resources to address internal company US sales and US tax compliance on a year-round basis. Clients have been thrilled with this unique offering in which for a flat monthly fee US Tax Services prepares and files all state sales and use tax returns of a client on a monthly basis and removes 100% of the attention required from the client to us.
Canadians or US citizens resident in Canada filing a US individual return
Reasons you may be filing a US tax return:
You are a US citizen but resident abroad and are filing to comply as required
You are a US citizen abroad filing to claim the 2008 Recovery Rebate
Your US immigration needs require that your US return filing be in good standing
You wish to renounce your US citizenship
You wish to reduce or eliminate your alternative minimum tax (AMT)
You wish to file a joint return with your nonresident alien spouse
You wish to comply with requirements of the Heroes Earnings Assistance and Relief Tax Act of 2008
US estate tax related
You wish to claim social security benefits and receiving such benefits require your US return filings
You are a Canadian who earned rental income or gain on sale of US real estate property
You are a Canadian who seeks a refund of US withholding tax including from gambling winnings (Vegas)
By opening the below link one can view our Form 1040 Organizer, which lists what information we require of taxpayers in order to prepare their individual US tax returns.
By opening the below link one can view our Form 1040 Pricing Matrix, which outlines the fees we charge to prepare an individual US tax return (Form 1040) by correlating the level of complexity & time needed to the fee charged. Identifying which of the listed components do (and do not) apply to one’s particular set of facts should allow one to self determine the approximate fee cost of one’s return.
1040 Pricing Matrix
Canadians (and other non-US residents) filing a US individual return solely to claim a cash refund for the additional child tax credit
Basically free money - US$1,000 per child- to taxpayers residing outside the US who have one or more children under age 17 at Dec 31 who are US citizens or residents. We can back-file as far back as four tax years before the current tax year. Join those already filing and enjoying the cash-plus accumulated interest refunds.
Don't fall for any email scams about your refund! IRS never initiates emails!
You filed your tax return and you're expecting a refund. You have just one question and you want the answer now -
Where's My Refund?
Whether you opted for direct deposit or asked IRS to mail you a check, you can track your refund through this secure Web site.
To get to your personal refund information, be ready to enter your:
Social Security Number (or IRS Individual Taxpayer Identification Number)
Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er))
Exact refund amount shown on your return
If you don't receive your refund within 28 days from the original IRS mailing date shown on Where's My Refund?, you can start a refund trace online.
If Where's My Refund? shows that IRS was unable to deliver your refund, you can change your address online.
Where's My Refund? will prompt you when these features are available for your situation.
CLICK LINK TO PROCEED: Where's My Refund?
Direct Contact Number for the IRS
Would you like to directly check, i.e., without incurring fees from us, your refund status or seek further detail clarification regarding your IRS notice or account? Call the IRS direct at (215) 516-2000 and follow the telephone voice prompts.
Note that the IRS handles high volume and also note that the IRS call responders are not one and the same as the experienced and tax technically knowledgeable lawyers at the IRS Chief Counsel Office.
Accordingly, it would appear unreasonable to expect similar knowledge and expertise regarding tax technical information from the IRS “front-line” phone staff and one should take caution in relying entirely on their comments (even info of the nature of record keeping and so forth should be “taken with a grain of salt”). In fact, as can be expected from an organization of its size, it has been the experience of our office that the IRS commits errors with regards to both tax technical and record keeping matters of taxpayers including notice issuance & taxpayer/tax year ID.
For questions on any matters regarding your tax return, the contact number for the IRS is (267) 941-1000. We strongly encourage clients to call the IRS direct to resolve questions and make inquiries (where the IRS is able to do so) since there is no charge for doing so whereas our office will charge our standard hourly rates for client inquires beyond the scope of the tax return preparation itself or for requests that require our contacting the IRS on your behalf in lieu of your calling direct to IRS.
It’s interesting to note that a self-employed American resident of Canada may be able to report "earned income" yet still not be subject to US self employment tax (best of both worlds) due to treaty agreements. See this link:
Self Employment Tax Exemption Form CPT56 (07)
Cdn- US Bilateral Social Security Agreement Exempting Self Employment Tax
This agreement can help with not being subject to US self employment tax on self employment income and at same time should allow the refundable additional child tax credit to operate.
One should request Form CPT56 (07) http://www.cra-arc.gc.ca/E/pbg/tf/cpt56/README.html from CRA as described below. Note that one will likely wait weeks or months to receive this. Be sure to keep a paper trail demonstrating proof that you’ve requested this form from CRA so that in the event CRA doesn’t provide it, you may demonstrate to IRS that you requested it.
Article V of the Agreement on Social Security between Canada and the United States reads: where, but for this Article, a person would be covered under the laws of both Contracting States in respect of earnings from self-employment, that person shall, in respect thereof, be subject only to the laws of Canada if that person is considered to be resident in Canada for the purposes of the relevant provisions of those laws, and only to United States laws in any other case. This exemption requires that you obtain Form CPT56 (07) from CRA and attach it to your U.S. return, for the correlating “detachment” period covered by the form.
In filling out CPT56, one should consult with one’s Canadian tax advisor who might advise instructions such as:
Put a check in the box for Self-Employed Person.
Put "Self" in box for "Name of employer in Canada.
"In "Initial Detachment" box, put the date in which you started self-employment in the "from" box; put "indefinite" in the "to" box.
Sign the taxpayer's name in the box for "Authorized signing officer."
Send CPT56 to CRA at the following address (CRA doesn't provide the below filing address anywhere on their website and because it may change, you might want to first verify via a phone call with CRA that it remains current):
ATTN: CPPEI Rulings Section – Social Security
Canada Revenue Agency - Ottawa Taxes Service Office
11th Floor, 333 Laurier Avenue West
For questions about this form or the countries’ agreement, one may call or write the CRA as described in the following.
From Canada or the United States, you can contact, free of charge, at:
1 800 277-9914
1 800 255-4786 (TTY)
Fax: 1 613 952-8901
One may also write to:
Income Security Programs
Human Resources Development Canada
Ottawa, ON K1A 0L4
The provision denies the basic credit and the qualifying child credit to individuals if the tax return does not include valid identification numbers for all persons listed on the return. A valid identification number is a Social Security Number issued by the Social Security Administration, and does not include a Taxpayer Identification Number issued by IRS.
Extending the Life of Foreign Tax Credit
Foreign tax credits are essential to eliminating double country taxation on one’s US return. Typically, as under statute, they expire after five years. Our office has identified and successfully implemented a method, fully acceptable by the IRS, to extend the life of certain foreign tax credits carry-forward to TEN years. This is especially helpful during years when US tax liability exists while Canadian tax liability doesn’t exist in that same year (or US tax liability exceeds that year’s Canadian foreign tax credits) – for example where income is exempted under Canadian tax law but not under US tax law (such as certain scholarship income).
Electronic Filing of Returns
In some instances taxpayers are required to e-file federal and/or state tax returns, while in other instances a taxpayer voluntarily opt to e-file because of the advantages it offers. In either case, to e-file federally and in some states, the preparer must be certified by the IRS to do so. The IRS performs exhaustive background checks before admitting into its e-file program an Electronic Return Originator (ERO), i.e. a tax preparer who originates the electronic submission of tax returns to the IRS. US Tax Services’ director is an IRS approved ERO.
In Michigan, the state website currently lists (when searching by city) only two tax preparers in Toronto that provide federal and state electronic filing services, with USTS’s director as one of the two listings. See (and set search city criteria for Toronto): https://treas-secure.state.mi.us/apps/findtaxpreparers.asp?city=toronto
Taxpayers, whose preparers file tax returns electronically on their client’s behalf, receive an acknowledgement within 48 hours that the IRS has received it. 48-Hour Acknowledgement = Peace of Mind.
The IRS says that e-file is even better than using registered mail.
Taxpayers are less likely to hear from the IRS down the road because e-filed returns are automatically checked for accuracy. If errors are detected, the taxpayer or the taxpayer’s tax preparer will receive an electronic message indicating the error and will allow the mistake to be corrected and resubmitted without penalty.
IRS e-file transmissions are very secure. IRS e-file meets or exceeds all government security standards.
IRS research shows that more than 80 percent of taxpayers who have tried e-file are “very satisfied” with the e-file’s benefits.
With IRS e-file, the taxpayer can receive refunds in about half the time as paper filers, even faster with Direct Deposit.
The taxpayer is likely to get fewer notices from the IRS because e-filed returns have a greater accuracy rate than paper-filed returns.
Misc e-file points:
Businesses also can enroll in the free Electronic Federal Tax Payment System (EFTPS). Once a taxpayer is enrolled, all federal tax payments can be made online, by phone or through payroll processors. For more information or to enroll visit EFTPS.gov.
There is no greater chance of being audited for taxpayers who use IRS e-file.