This is a general apology to those who wrote to
"ask an expert" at www.centa.com. We
have no idea how many questions were ignored by our system. We do know
that there were over 6,000 of them in the same time period of 2007 to
2008. I feel pretty silly for not even noticing it. My son Peter
kept on telling me to answer the questions and I said I "was". Not once,
did the concept that we were not even 'getting them' come up until Vlad
made a special effort to reach me. Even this one was spammed out
as one of just too many.
--------------------------
Your "Ask an Expert" form isn't functional. Kept
getting error messages, so I'll repeat it here:
XXZXXX XXXXXXXXX
xxxxxxx
Type of question: "Both U.S. &
Canada"
Subject: Business tax issues
American-Canada
I am looking into immigrating to Canada and trying
to figure out how to handle my situation:
I am self-employed operating a small 1-person
business (U.S. 'C' corporation) out of home in XXXXXXXXX providing marketing
support/Internet marketing to business clients.
If I was to relocate to Canada, majority, if not
all, of my clients would still be in the U.S.
How does this affect business structure. Should I
continue operating as an U.S. corporation? And possibly find a registered
agent/mail forwarding agent in XX?
Or should I set up a legal entity in
Canada?
------------------------------------
david ingram replies:
Unfortunately, this was spammed out and i am just finding it now. It also points out how busy we were because we did not notice that the Ask an Expert" system was down for months.
Aas an Internet marketing man, you can likely appreciate the fact that I was not paying a lot of attention to this part of my business. Although we noticed that email questions were down, there were still too many to answer and they come / came from enough different sources, that one not working just did not trigger with me until another savvy person made a point of telling me - in no uncertain terms -- David your #%^*& ask an expert is not working. Would you believe (being an Internet marketing man) that we did not spot it from Oct 1, 2008 to May 10, 2009 or so. Seven months at least. For the most part, I still had too many to answer but missed sending any reply to people who tried and putting them on a question and answer list which usually will answer any question in two or three weeks any way. (as an aside, if you type (no quotes)- income tax expert - or - income tax experts - into google, we manage to come up in the top three out of 14,000,000 or 27,000,000 respectively. Under the less serious - income tax help - we were in the top 3 out of 40,000,000 and ahead of the IRS a minute ago. As a 4 person office I can not even begin to deal with everthing that comes in. I am answering this as an apology to you because you tried to tell me.
You may have your answer already since you sent this on January 9th. If so, it will be interesting to see if they fit together. I will tell you that I tend to answer these questions in a manner that keeps the paperwork (and therefore the expense) down. I could double my gross income overnight by telling 10% of my clients to incorporate.
david ingram replies:
Unfortunately, this was spammed out and i am just finding it now. It also points out how busy we were because we did not notice that the Ask an Expert" system was down for months.
Aas an Internet marketing man, you can likely appreciate the fact that I was not paying a lot of attention to this part of my business. Although we noticed that email questions were down, there were still too many to answer and they come / came from enough different sources, that one not working just did not trigger with me until another savvy person made a point of telling me - in no uncertain terms -- David your #%^*& ask an expert is not working. Would you believe (being an Internet marketing man) that we did not spot it from Oct 1, 2008 to May 10, 2009 or so. Seven months at least. For the most part, I still had too many to answer but missed sending any reply to people who tried and putting them on a question and answer list which usually will answer any question in two or three weeks any way. (as an aside, if you type (no quotes)- income tax expert - or - income tax experts - into google, we manage to come up in the top three out of 14,000,000 or 27,000,000 respectively. Under the less serious - income tax help - we were in the top 3 out of 40,000,000 and ahead of the IRS a minute ago. As a 4 person office I can not even begin to deal with everthing that comes in. I am answering this as an apology to you because you tried to tell me.
You may have your answer already since you sent this on January 9th. If so, it will be interesting to see if they fit together. I will tell you that I tend to answer these questions in a manner that keeps the paperwork (and therefore the expense) down. I could double my gross income overnight by telling 10% of my clients to incorporate.
To your question.
1. If you are moving to Canada, the possession of a Canadian Corporation is an expensive accounting proposition. You must file a form US 5471 each year to report the internal earnings of the Canadian (or French or Ethiopian or Chinese) corporation (every year) on your 1040. Typically our minimum charge for this adds another $1,500 to your accounting bill in addition to any accounting or bookkeeping charges for the Canadian (we do not do French, ethiopian or Chinese) corporation. The failure to file the 5471 can result in $60,000 of fines per year per shareholder although the typical fine would be $10,000.
2. You should go to www.centa.com and read:
a. the October 1993 newsletter on dual citizenship (top left hand box)
b. the October 1995 newsletter on the duties of a US citizen or green card holder residing in Canada (or Spain, or Australia or Indonesia, etc., )In this, it talks about a $1,000 to $25,000 fine for the 5471 - it has since gone to the $10,000 to $60,000 range. Pay attention tot he TDF 90-22.1 reporting which has now gone to a minimum of $10,000 for failure to file.
c. The US / Canada taxation section in the second box down on the right hand side.
When and if you move to Canada, your US C Corporation becomes a Canadian Corporation for tax purposes because Mind and Control are in Canada and you will have to file a Canadian Corporation Tax return for it as well.
In all of these cases, I strongly advise that you have a Dec 31st year end because it makes the accounting so much simpler for both countries with respect to reporting, the 5471 AND the use of Foreign tax credits.
There is no way for me or anyone else to adequately address the question more specifically. I could write a book on it and still not cover 'your' specific situation.
In general, however, I will suggest that "NOT" using a corporation would make your life much simpler. If you intend to spend the profits you make, a corporation does NOT usually save you any over all income tax. Lower corporation tax rates are meant to allow a corp to have money to buy new buildings and new trucks and new machinery. The lower rates are "not" designed to give one man consultants a lower tax rate and usually do not achieve this state if they actually take the money out to use for living expenses.
If it is a question of public liability, a Corporation does NOT protect a director of a corporation which you are. You, as the driver of a corporation which has provided your services are liable as much as a proprietor. Think of a car accident. You are hit by someone driving a company car. When you sue for damages, you sue the owner of the car (the corporation) AND the DRIVER of the car.
ANY employee of ANY corporation can be sued personally for their actions. In practice, if it is a big corporation, the employee does not get sued. If it is a little one, they do.
There is a debate as to whether an S or A C corporation makes more sense for a one person operation..
That debate usually revolves around perceived lower payroll taxes with a C corporation.
However, since historically, the higher payroll taxes (FICA) meant a higher retirement social security pension, i am generally in favor of the higher FICA payments. This is really showing up this year where so many lost so much in the market, their 401(K) and IRA accounts. a lot of people who ridiculed FICA and CPP are now very happy to have them.
Incidentally, since you are now going to be a cross border investor, you would be well advised to look at the 5 interviews I have done on cross border investing with Dan Walkow at www.david-ingram.com - You can see more about cross-borer investing at www.seabankcapital.com
1. If you are moving to Canada, the possession of a Canadian Corporation is an expensive accounting proposition. You must file a form US 5471 each year to report the internal earnings of the Canadian (or French or Ethiopian or Chinese) corporation (every year) on your 1040. Typically our minimum charge for this adds another $1,500 to your accounting bill in addition to any accounting or bookkeeping charges for the Canadian (we do not do French, ethiopian or Chinese) corporation. The failure to file the 5471 can result in $60,000 of fines per year per shareholder although the typical fine would be $10,000.
2. You should go to www.centa.com and read:
a. the October 1993 newsletter on dual citizenship (top left hand box)
b. the October 1995 newsletter on the duties of a US citizen or green card holder residing in Canada (or Spain, or Australia or Indonesia, etc., )In this, it talks about a $1,000 to $25,000 fine for the 5471 - it has since gone to the $10,000 to $60,000 range. Pay attention tot he TDF 90-22.1 reporting which has now gone to a minimum of $10,000 for failure to file.
c. The US / Canada taxation section in the second box down on the right hand side.
When and if you move to Canada, your US C Corporation becomes a Canadian Corporation for tax purposes because Mind and Control are in Canada and you will have to file a Canadian Corporation Tax return for it as well.
In all of these cases, I strongly advise that you have a Dec 31st year end because it makes the accounting so much simpler for both countries with respect to reporting, the 5471 AND the use of Foreign tax credits.
There is no way for me or anyone else to adequately address the question more specifically. I could write a book on it and still not cover 'your' specific situation.
In general, however, I will suggest that "NOT" using a corporation would make your life much simpler. If you intend to spend the profits you make, a corporation does NOT usually save you any over all income tax. Lower corporation tax rates are meant to allow a corp to have money to buy new buildings and new trucks and new machinery. The lower rates are "not" designed to give one man consultants a lower tax rate and usually do not achieve this state if they actually take the money out to use for living expenses.
If it is a question of public liability, a Corporation does NOT protect a director of a corporation which you are. You, as the driver of a corporation which has provided your services are liable as much as a proprietor. Think of a car accident. You are hit by someone driving a company car. When you sue for damages, you sue the owner of the car (the corporation) AND the DRIVER of the car.
ANY employee of ANY corporation can be sued personally for their actions. In practice, if it is a big corporation, the employee does not get sued. If it is a little one, they do.
There is a debate as to whether an S or A C corporation makes more sense for a one person operation..
That debate usually revolves around perceived lower payroll taxes with a C corporation.
However, since historically, the higher payroll taxes (FICA) meant a higher retirement social security pension, i am generally in favor of the higher FICA payments. This is really showing up this year where so many lost so much in the market, their 401(K) and IRA accounts. a lot of people who ridiculed FICA and CPP are now very happy to have them.
Incidentally, since you are now going to be a cross border investor, you would be well advised to look at the 5 interviews I have done on cross border investing with Dan Walkow at www.david-ingram.com - You can see more about cross-borer investing at www.seabankcapital.com
SUGGESTED PRICE GUIDELINES - Aug 5,
2008
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax service help.
$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund.
Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files. As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files. It can take us a valuable hour or more to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance.
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax service help.
pert US Canada Canadian American
Mexican Income Tax service and
help.
David Ingram gives expert income
tax service & immigration help to non-resident Americans &
Canadians from New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone
consultations are $450 for 15 minutes to 50 minutes (professional hour). Please
note that GST is added if product remains in Canada or is to be returned to
Canada or a phone consultation is in Canada. ($472.50 with GST for in person or
if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income
Tax service and help.
This is not intended to be definitive but in
general I am quoting $900 to $3,000 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two countries
$3,000 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare
Canadian only (lives in Canada, no US connection period) with two or
three slips and no capital gains, etc. for $200.00 up.
However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms,
expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or
T5008 or T101 --- Income trusts with amounts in box 42 are an even larger
problem and will be more expensive. - i.e. 20
information slips will be at least $350.00
With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
$250.
A Business for $400 - Rental and business likely
$550 to $700
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund.
Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files. As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files. It can take us a valuable hour or more to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance.
This is a guideline not etched
in stone. If you do your own TDF-90 forms, it
is to your advantage. However, if we put them in the first year, the computer
carries them forward beautifully.
--IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.--
-Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com or www.garygauvin.com. If you forward this message, this disclaimer must be included." -
--IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.--
-Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com or www.garygauvin.com. If you forward this message, this disclaimer must be included." -
