|Posted on 4 February, 2016 at 13:50|
Excerpt from CRA website (http://www.cra-arc.gc.ca/scrty/frdprvntn/menu-eng.html)
Know how to recognize a scam
Examples of fraudulent communications:
online refund forms
There are many fraud types, including new ones invented daily.
Taxpayers should be vigilant when they receive, either by telephone, mail, text message or email, a fraudulent communication that claims to be from the Canada Revenue Agency (CRA) requesting personal information such as a social insurance number, credit card number, bank account number, or passport number.
These scams may insist that this personal information is needed so that the taxpayer can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language to scare individuals into paying fictitious debt to the CRA. Other communications urge taxpayers to visit a fake CRA website where the taxpayer is then asked to verify their identity by entering personal information. These are scams and taxpayers should never respond to these fraudulent communications or click on any of the links provided.
To identify communications not from the CRA, be aware of these guidelines.
If you receive a call saying you owe money to the CRA, you can call us or check My Account to be sure.
If you have signed up for online mail (available through My Account, My Business Account, and Represent a Client), the CRA will do the following:
send a registration confirmation email to the address you provided for online mail service for an individual or a business; and
send an email to the address you provided to notify you when new online mail is available to view in the CRA's secure online services portal.
The CRA will not do the following:
send email with a link and ask you to divulge personal or financial information;
If you call the CRA to request a form or a link for specific information, a CRA agent will forward the information you are requesting to your email during the telephone call. This is the only circumstance in which the CRA will send an email containing links.
ask for personal information of any kind by email or text message.
request payments by prepaid credit cards.
give taxpayer information to another person, unless formal authorization is provided by the taxpayer.
leave personal information on an answering machine.
When in doubt, ask yourself the following:
Did I sign up to receive online mail through My Account, My Business Account, or Represent a Client?
Did I provide my email address on my income tax and benefit return to receive mail online?
Am I expecting more money from the CRA?
Does this sound too good to be true?
Is the requester asking for information I would not provide in my tax return?
Is the requester asking for information I know the CRA already has on file for me?
If you do have a debt with the CRA and can't pay in full, take action right away. For more information, go to When you owe money – collections at the CRA.
How to protect yourself from identity theft
Never provide personal information through the Internet or by email. The CRA does not ask you to provide personal information by email.
Be suspicious if you are ever asked to pay taxes or fees to the CRA on lottery or sweepstakes winnings. You do not have to pay taxes or fees on these types of winnings. These requests are scams.
Keep your access codes, user ID, passwords, and PINs secret.
Keep your address current with all government departments and agencies.
Choose your tax preparer carefully! Make sure you choose someone you trust and check their references. Always review your return, agree with the content before filing, and follow up to make sure you receive your notice of assessment, since it contains important financial and personal information that belongs to you.
Before supporting any charity, use the CRA website at www.cra.gc.ca/charities to find out if the charity is registered and get more information on the way it does business.
Be careful before you click on links in any email you receive. Some criminals may be using a technique known as phishing to steal your personal information when you click on the link.
Caller ID is a useful function. However, the information displayed can be altered by criminals. Never use only the displayed information to confirm the identity of the caller whether it be an individual, a company or a government entity.
Protect your social insurance number. Don't use it as a piece of ID and never reveal it to anyone unless you are certain the person asking for it is legally entitled to that information. If an organization asks for your social insurance number, ask if it is legally required to collect it, and if not, offer other forms of ID.
Pay attention to your billing cycle and ask about any missing account statements or suspicious transactions.
Shred unwanted documents or store them in a secure place. Make sure that documents with your name and SIN are secure.
Immediately report lost or stolen credit or debit cards.
Carry only the ID you need.
Do not write down any passwords or carry them with you.
Ask a trusted neighbour to pick up your mail when you are away or ask that a hold be placed on delivery.
Have you been a victim?
You should report deceptive telemarketing to the Canadian Anti-Fraud Centre online or by calling 1-888-495-8501.
|Posted on 22 March, 2015 at 21:10|
You Should Remember to Change From RRSP to RRIF
1) Turning 71 this year? Make a final RRSP contribution so you can lower your tax rate and get one last refund before converting to a Registered Retirement Income Fund, mandatory when you hit 71.
2) Cut down the family's tax billby investing in the lower-earning spouse's name so interest and capital gains are taxed at their rate.
3) If you are the lower income partner, borrow from your spouse to buy stocks and bonds.
4) You Can Borrow from Your Spouse. If you’re the lower-income partner, borrow from your spouse to buy stocks and bonds. Write up a promissory note with the interest rate and principal, since it’s a loan. Earn more than two per cent on your investments, the current spousal loan interest rate, and you’ll make money.
5) You Can Share With Your Kids
Give cash to your adult kids. Money or assets gifted to a child 18 or over don’t result in income attribution to parents.
6) You Should Start a Tax-Free Savings Account
You can give your son or daughter up to $5,500 a year to put in a Tax-Free Savings Account (TFSA). It compounds without penalty, and they won’t pay taxes on withdrawal.
7) You Can Invest for Your Child
Income transferred or loaned to your children under 18 means you pay the tax on any dividends and interest earned. But not with capital gains. If you buy shares of growth companies in your five-year-old’s name with $50,000, by the time he’s 18, those shares could be worth $100,000. He can then withdraw, say, $10,000 a year, at a lower rate.
8 )You Can Create an Account in Your Child's Name
Deposit your child’s tax benefit cheque in an account in their name—income earned there will be taxed at their far lower rate.
It pays to invest in education. Earnings on a Registered Education Savings Plan (RESP) are tax-exempt. The federal government will pay a grant into the RESP that’s 20 per cent of your annual contribution, per beneficiary. And when your child starts post-secondary, funds can be withdrawn for free.
10) You Can Help Your Student
Students always need money and should file a tax return even if they have no income. If they’re 19 years and older, they might qualify for refundable tax credits.
Pay attention to where you hold investments. GICs, bonds and other fixed-income investments should be held in a tax-sheltered account, such as an RRSP or TFSA, while U.S. stocks should be kept in a non-registered investment account, where the foreign withholding tax on dividends can be recovered.
12) You Should Know About the Home Buyers' Plan
If you’re buying your first home, you can make withdrawals for the down payment from your RRSPs thanks to the federal government’s Home Buyers’ Plan. You and your spouse can withdraw up to $25,000 each, tax-free, with 15 years to repay the loan.
13) You Can Share Your Benefits
If you and your spouse are 60-plus and receiving Canada Pension Plan payments, you can share the benefits equally.
14) You Should Make Sure You've Got it All
Have you claimed all the tax refunds you’re entitled to? You have 10 years to adjust for errors or omissions in tax filings.
|Posted on 11 May, 2014 at 0:10|
Now, the State Department interim rule just raised the fee for renunciation of U.S. citizenship to $2,350 from $450. Critics note that it's more than twenty times the average level in other high-income countries.Aug 28, 2014
My intent on this subject is not to cut and paste dense text on tax law. For that there are a myriad of sites including the IRS to Google. This is to address the common concerns from every day clients who pass through my office. It is for the client without a law degree who just wants to know what's going on.
This question comes up more than once a week usually by Americans who have lived and worked in Canada for decades. I am always interested in whether or not the client has emotional ties to the US as it is likely to become more difficult to enter the US once one has renounced. News this year indicates that there has been legislation introduced in the U.S. Senate that would give U.S. Customs the right to refuse entry to anyone who has renounced their citizenship - to date this has not been passed. This of course would be difficult for those with aging parents in the US.
Several of my clients successfully renounced last year and have entered the US many times since without incident. Whether or not that will continue is anyone's guess. To date the renouncification process although lengthy has not been too difficult or costly.
I worked with David Ingram for over a decade before he suddenly passed in 2012 from terminal cancer. In the four decades preceding his death there was only one client who renounced. The year following his death I lost count of the clients who renounced. Ingram always likened having dual citizenship to winning the lottery and indeed sometimes it was! The Zeitgeist has since changed dramatically with the "new" enforced FBAR rules now known as BSA.
The vast majority of my clients choose to file an annual tax return and enjoy the benefits of having the option to work in the US. Conversely, bank account reporting becomes more difficult and costly every year and it seems to be the main reason dual citizens are electing to renounce. They feel the compliance is very invasive and feel quite threatened at revealing such private information.
There is a interesting movement out of Toronto, Canada to challenge the changes in Canadian laws that would impose the U.S. FATCA law on all Americans in Canada. If you would like to see an interesting legal side to this discussion go to http://maplesandbox.ca/2014/alliance-for-the-defence-of-canadian-sovereignty-adcslalliance-pour-la-defense-de-la-souverainete-canadienne-adsc-is-established-in-canadaest-creee-au-canada/
This never ending story will be continued with more points of view and case studies...
|Posted on 9 May, 2014 at 23:55|
MarketsNews & Commentary
Mutual funds: Beware, dual citizensMar 27, 2014 by Gordon Pape
With all the concerns about the long arm of the IRS reaching into Canada to grab U.S. citizens residing here (including dual citizens) now comes another worry. It’s mutual funds and the message is simple – if you are an American, don’t buy any Canadian-based funds.
They’re considered to be Passive Foreign Investment Companies (PFICs) and under U.S. tax law, they can pose a real problem for the estimated one million Americans living in our country.
PFICs are pooled investment accounts located outside the U.S. They can include mutual funds, money market funds, and even some insurance products.
The problem is that these products are taxed at a much higher rate. Americans owning U.S.-based mutual funds pay a long-term capital gains rate of 15 per cent. But the same person with a Canadian fund would pay tax at the top U.S. personal rate of 35 per cent. It doesn’t matter what the fund holds, all that counts is that it is domiciled in Canada. (The same rule applies to all other countries.)
A blog on the Tax Samaritan website calls PFICs “a nightmare”. It goes on to say: “While many portions of the U.S. tax code possess confusing and sometimes harsh rulings, the tax rules for Passive Foreign Investment Companies (PFIC) is almost unmatched in its complexity and almost draconian features. Countless times, Americans overseas have come to us to prepare what they thought would be straightforward tax returns – only to later learn that the small foreign investment they had made in a non-U.S. mutual fund is now subjecting them to all the significant filing requirements and tax obligations that apply to a PFIC.”
If you’re in this situation, you’re required to file IRS Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, whenever you receive a fund distribution or sell the position for a capital gain or loss. To make matters worse, the form must be filed for each PFIC you own. That’s right – it you own 10 Canadian mutual funds and receive distributions from each, you need to file 10 forms. Is that ridiculous or what?
An article by John L. Harrington, Marc D. Teitelbaum, Jeffrey H. Koppele and Andrea Sharetta of Dentons published in January reviews the revised rules for PFICs published by the U.S. Treasury Department. It states that a non-U.S. company is generally considered to be a PFIC if it meets one of these criteria:
1. 75 per cent or more of its gross income for the taxable year is passive income.
2. The average percentage of assets it holds during the taxable year which produce passive income or which are held for the production of passive income is at least 50 per cent.
The article goes on to explain in depth the many complications of PFIC ownership; you can read all the depressing details here.
What it boils down to if you’re a U.S. citizen in Canada is simple: Don’t invest in Canadian mutual funds or anything that may fall under the PFIC ambit. If you do, be prepared to file a lot of paperwork – and pay a very high rate of tax.
|Posted on 9 May, 2014 at 23:55|
The reporting of foreign bank and financial accounts (FBAR) has changed for 2014.. and not for the better.
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website. The system allows the filer to enter the calendar year reported, including past years, on the online FinCEN Form 114. It also offers an option to “explain a late filing,” or to select “Other” to enter up to 750-characters within a text box where the filer can provide a further explanation of the late filing or indicate whether the filing is made in conjunction with an IRS compliance program.
What this means for the most of us, is a new time consuming way to make the nonsense reporting harder for the average person. The accounts will no longer carryforward on software and need to be individually entered for each account. There will be no easy out for this madness as fees will have to be adjusted for the time needed to prepare the required forms.
|Posted on 9 May, 2014 at 23:45|
Retirement and RRSPs
Dual citizen? Don't ignore the tax rules when retirement planning
Special to The Globe and Mail
Published Sunday, Feb. 02 2014, 4:45 AM EST
Every year, when Anu Nijhawan looks at her investments and her retirement planning, she also looks over her shoulder,
“I’m a dual citizen of Canada and the United States, so I personally have to deal with these issues,” says Ms. Nijhawan, a tax partner at the Calgary office of Bennett Jones LLP.
In addition to helping her law clients navigate the craggy shores of international tax law, Ms. Nijhawan needs to take into account how her own financial decisions will be viewed at tax time not just by the Canada Revenue Agency, but also by the U.S. Internal Revenue Service.
The tax situation can be tricky, as many as a million Canadians are also U.S. citizens. It can become especially complicated for dual citizens who hold Registered Retirement Savings Plans, Registered Education Savings Plans, Tax-Free Savings Accounts and for those who are already retired.
Call it a complicated case of American exceptionalism. “The U.S. is different,” Ms. Nijhawan says.
Dual citizenship is less of a problem for Canadians who hold a second passport from other countries aside from the United States. Under various international tax treaties, all the CRA demands is that you show you’re paying taxes to the country where you’re located.
Most foreign countries reciprocate, taxing people based on where they live and work, not their citizenship. It has been estimated that 2.8 million Canadians live outside of Canada.
Unlike nearly every country in the world, the United States insists that if you are one of their citizens living in Canada, or anywhere in the world, you must also file a U.S. return. It will likely cost you money to comply – and could hit you hard if you don’t.
Dual Canada-U.S. citizens “are faced with a choice,” Ms. Nijhawan says. “They can continue to do nothing and hope that it all works out. The other thing is to start filing U.S. returns [as well as their Canadian ones], dating back for a specific time, say three to five years. The big issue is the time and effort it takes to get into compliance."
It’s not simply a matter of downloading and filling out a U.S. tax return, either.
“It’s a disaster, a horrible disaster, because of all the reporting requirements and the cost of compliance,” says Michael Bondy, partner in London, Ont., at Collins Barrow KMD LLP, a nationwide chartered accounting group.
It’s about to get worse, he adds.
U.S. citizens have always been expected to self-report to the IRS, and, until recently, the tax implications have more or less been neutral for dual citizens with low and moderate incomes.
Under Canada-U.S. tax treaties, a U.S. filer living in Canada can deduct the amount of tax paid in Canada from his or her U.S. bill. Generally, Canadian income tax is higher than U.S. tax.
“If everything worked the way it’s supposed to work, you would pay Canadian taxes but you’d pay little or no U.S. tax,” Ms. Nijhawan says. This is generally true for individuals with up to about $200,000 a year in income.
The money you put away in an RRSP, and your RRSP’s gains, are generally not subject to extra U.S. tax while you’re contributing and the money stays in the plan, because the Canada-U.S. treaty recognizes these retirement savings.
U.S. citizens in Canada are supposed to fill out a U.S. form electing to defer any possible taxes until after the RRSP is converted into a Registered Retirement Income Fund at age 71.
RESPs and TFSAs are in the IRS’s sights, though. The tax treaty doesn’t recognize these plans, so the grant money that the Canadian government contributes to the education plans and the income you earn on both TFSAs and RESPs are subject to U.S. tax if you hold U.S. citizenship.
In addition to filing a tax return, U.S. citizens in Canada are required to file a foreign bank account report (FBAR) before June 30 of every year. They’re supposed to report any
“foreign” account that had more than $10,000 – remember, to the United States, your Canadian savings account is in “foreign” currency.
Until recently, many dual citizens simply ignored the U.S. tax rules;
in many cases they weren’t aware of them, or didn’t even know that they were U.S. citizens as well as Canadians.
“You may have moved here when you were 3 with your parents and have no idea you’re also an American,” Mr. Bondy says.
It’s a bigger problem now because under a new U.S. law, the Americans have ways to find out.
Passed in 2010, the Foreign Account Tax Compliance Act (FATCA) takes effect this year – ironically on Canada Day. It requires Canadian banks and those around the world to go through all their accounts and tell the IRS which customers might be subject to U.S. tax.
FATCA has been criticized by international law experts, the Canadian Bankers Association and even mildly by Finance Minister Jim Flaherty, but banks and their customers face huge penalties if they don’t comply.
The U.S. law is intended to combat money laundering and the exploitation of tax havens. No one considers Canada to be a tax haven, but it applies to U.S. residents living here nevertheless.
U.S. citizens in Canada can always renounce their U.S. citizenship, but this can bring complications, too. U.S. citizens must declare that they are not renouncing to avoid taxes, and they can be penalized if it’s found out that they were.
There has also been legislation introduced (though not passed) in the U.S. Senate that would give U.S. Customs the right to refuse entry to anyone who has renounced their citizenship.
Ms. Nijhawan and others say the bottom line is that if you’re a dual Canadian-U.S. citizen, it’s wisest to try to comply with their rules. It will cost at least $500, in many cases more, to have an accountant prepare your forms. You should fill out the proper forms to declare your bank accounts and RRSP – and, unfortunately, stay away from RESPs and TFSAs.
|Posted on 9 May, 2014 at 18:55|
The Globe and Mail
February 5, 2014 Ottawa to give IRS information on Americans living in Canada By BARRIE MCKENNA
Officials say Canada secured significant concessions after long negotiations with the U.S. Ottawa will start routinely sharing vast amounts of financial data about Americans living in Canada with U.S. tax authorities.
Canada and the United States signed an agreement Wednesday that paves the way for full implementation of a controversial U.S. crackdown on offshore tax evasion in 2015.
Ottawa has long complained that the U.S. law – the Foreign Account Tax Compliance Act (FATCA) – might violate Canadian privacy laws and would impose undue hardship for the estimated one million Americans and dual citizens living here.
"Canada engaged in lengthy negotiations with the U.S. government to address our concerns and, as a result, significant exemptions and other relief were obtained," Finance Minister Jim Flaherty said in a statement.
Under the agreement, a long list of registered accounts will be exempt from the new reporting requirements, including registered retirement savings plans, tax free savings accounts, registered retirement income funds and registered education savings plans. Also excluded are accounts at credit unions with less than $175-million in assets and at smaller institutions where the vast majority of customers are Canadians.
"That is significant relief for Canada taxpayers because it scopes out a huge number of accounts at Canadian institutions," explained Carlene Hornby, co-leader of the FATCA practice at KPMG Canada in Vancouver.
Tax experts said the deal is a wake-up call to Americans living in Canada that they should quickly get their tax filings up to date with the U.S. Internal Revenue Service.
"For American citizens living in Canada, this really is the indication that there is nowhere left to hide," warned accountant Kevyn Nightingale of MNP LLP in Toronto. "The clock is ticking now. The flow of information to the IRS is going to be computerized and comprehensive."
By this time next year, the IRS will know much more about Americans in Canada, he pointed out.
Canadian authorities said they will not collect U.S. taxes or penalties from Canadians. But the tax-sharing arrangement would give the IRS the ability to target individuals they believe may be offside, including the obligation of all Americans to file an annual tax return, wherever they live.
"It makes me sick," said Lynne Swanson, 62, of London, Ont., who moved to Canada in 1973 and believed she had long ago relinquished her U.S. citizenship. "I feel betrayed by the country I've been loyal to for 45 years."
The scope of the tax-sharing agreement is much broader than most people realize, according to KPMG's Ms. Hornby. She said virtually all companies in Canada – from small family-run businesses to multinationals – will soon be asked by their banks to provide more information about the tax status of their shareholders.
To get around privacy concerns, the Canada Revenue Agency will collect account information from Canadian financial institutions, not the IRS.
Under the deal, Canadian financial institutions must begin sharing information about accounts held by Americans in July of this year. That information will be handed over to the IRS starting in 2015. Also, Canadians will not be subject to a 30-per-cent U.S. withholding tax for non-compliance.
Canadian banks, who have long complained about the cost and complexity of FATCA, called the deal the "best approach" under the circumstances. "The alternative would potentially expose Canadians to punitive U.S. withholding taxes on income from their investments, including retirement income, of 30 per cent," the Canadian Bankers Association said in a statement.
Perrin Beatty, a former federal revenue minister who is now President and CEO of the Canadian Chamber of Commerce, warned that compliance would be "exceptionally costly" for banks. "It's intrusive in terms of people's property," he said.
Canada is the last Group of Seven country to reach a FATCA implementation agreement. The agreement modifies the existing Canada-U.S. Tax Convention.
"FATCA implementation is critical to combatting international tax evasion and promoting transparency," said Robert Stack, Deputy Assistant U.S. Treasury Secretary. "The agreements clearly demonstrate the considerable international support behind FATCA and we are proud to lead the global charge on this pressing issue."
With files from Bill Curry