QUESTION:
If an American citizen had a consulting company incorporated offshore, but
the work was all in the U.S., would it be beneficial to become a Canadian
citizen?
----------------------------------------------------
david ingram replies: - Short question - long but important answer
An American Citizen Must file a US tax return every year they are alive no
matter where they live, no matter where the money is coming from and no
matter what other citizenships they might have.
Watch out for OFFSHORE corporations as well. Jerome Schneider who set up as
many as anyone else over a 12 year period, was recently convicted. As part
of his plea bargain for a lesser sentence, he turned in over 1,000 clients
he had set up. You can read the full story at
http://www.quatloos.com/Jerome_Schneider_exhibit.htm
In his plea bargain, Jerome Schneider (who used a lot of my material
inappropriately) agreed to pay a restitution of $100,000 (supposedly all he
had left after millions of fees and more importantly turn in all the
clients, their lawyers, bankers and anyone else involved. You can read his
plea bargain here.
http://www.quatloos.com/Jerome_Schneider_Plea_Agreement.pdf
I attended one of his seminars at the Waterfront Hotel and found it a joke.
Also spotted a whole bunch of my material in his handouts. It was obvious
that the material had come from my faxed monthly newsletters from Oct 93 to
August 1998. He was a paid subscriber at $125.00 per year.
In addition, if you have an offshore corporation, you are liable to file a
form 5471 each year. Failure to file the 5471 form (which makes all the
internal finances of the offshore corporation part of your 1040 Income tax
return) can accrue a fine (per year) of $10,000 for the first 90 days and
$10,000 every 30 days thereafter. Note that this fine does not require the
corporation to have made a profit or even done any business. It is a
parking meter type of fine for being the proud owner of an OFFSHORE (Canada
and Mexico are offshore for this purpose) corporation and not reporting it
to the IRS. Over 1,000 of Jerome Schneider's clients can expect major fines
form this because he was advising them NOT to file the form.
In addition, if that Offshore corporation (or just you) have signing
authority over foreign accounts totalling $10,000 or more, you need to file
forms T DF-90.22 for each bank account you have a signing authority over.
This would include a trust fund you have set up in Canada for your
grandkids' education or a church or boy scout account if you could sign
them.
Failure to file form T DF-90 to report the bank account for your offshore
corporation can earn a fine of up to $500,000 PLUS five years in jail,
Should you become a Canadian? EVERYONE should become a Canadian. Canada is
a great country with everything good that the US has plus more. You have
everything to gain and NOTHING to lose in becoming a Canadian.
However, becoming a Canadian does not save you any income tax as long as you
remain a US citizen. You will still have all the Income tax liabilities you
have now.
The Instructions for form 5471 can be read here
http://www.irs.gov/pub/irs-pdf/i5471.pdf
The actual form is at:
http://www.irs.gov/pub/irs-pdf/f5471.pdf
Some of the extra schedules are at:
Schedule J
http://www.irs.gov/pub/irs-pdf/f5471sj.pdf
Schedule M
http://www.irs.gov/pub/irs-pdf/f5471sm.pdf
Schedule N
http://www.irs.gov/pub/irs-pdf/f5471sn.pdf
Schedule O
http://www.irs.gov/pub/irs-pdf/f5471so.pdf
Read the fine print at the bottom of form TD-F.90-22 -
http://www.irs.gov/pub/irs-fill/f9022-1.pdf
We had a 105 year old lady with a $10,000 fine for not filling in form TD
F-90.22
A 68 year old lady had a $60,000 fine.
=========================
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram host a LIVE talk show called "ITS YOUR
MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Local calls are taken at (604) 280-0600 and Long Distance calls are taken at
1( 866) 778-0600
Callers to the show are invited to attend free seminars on financial
planning with such specialities as deductible mortgage interest. They are
held at Fred Snyder's Office at 1764 West 7th in Vancouver - (604) 731-8900
for more information.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com> www.david-ingram.com
<http://www.david-ingram.com/>
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