2 Mistakes Often Witnessed on Cross Border US and Canadian Tax Returns

Trade between the US and Canada has been encouraged by both governments. That has made it easier for the citizens in both countries to exploit available opportunities across the border. This beneficial partnership between the two great countries also imposes a responsibility on their citizens to pay taxes.

Since most people make errors when filing United States Tax Return, it is good to seek professional help. That will minimize the risk of mistakes likely to attract fines or prosecution. Here are some mistakes often witnessed on cross border US and Canadian tax returns.

Incorrect Calculation of Foreign Tax Credit

Some Americans in Canada have a source of income both in Canada and USA. Incorrect calculation of their foreign tax credits (FTC) in each respective return could lead to double taxation. Also, if they over-calculate their FTC, they will face a review from the CRA or the IRS.

Foreign tax credits in US are calculated using form 1116 and in Canada, taxpayers use form T2209. A good understanding and use of these forms will ensure your FTC is filed accurately.

Taxing US Social Security on US Returns

This is the most common error encountered by many tax accountants. According to Article XVIII (18) of the Canada-US income tax treaty social security payments made to Canadian residents will only be taxed in Canada.

So, if you stay in Canada and receive social security payment, they will be reported on your Canadian T1 income tax return, after a 15% deduction and excluded from your US 1040 income tax return. To get treaty exclusion, file form 8833.  That will enable you to pay the right amount for cross border tax.

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What are the Qualities of a Good Tax Advisor?

Many folks cringe whenever the tax season approaches. Most of them aren’t pleased with the hefty taxes they must pay. Unfortunately, they never care to know if they are paying the right amount to this “necessary evil”. Over the years, the tax code has become complicated making it challenging for unskilled individuals to file their taxes effectively. 

So, without professional help, you cannot use these codes to your advantage. You need the assistance of a reliable tax expert to get the tax deductions you qualify for this season. Here are the qualities of good tax advisors. 

They Ask Many Questions 

Whether you hire the experts to register a company in US or file your returns, they will ask many questions. These specialists know their clients desire maximum deductions, especially when filing taxes. Hence, they will need sufficient info regarding your personal situation. 

Your professional will ask you many questions about your income, life changes, business, investments, and more. Every question asked has the goal of ensuring you get tax relief. 

They Reduce Taxes Legally 

Every taxpayer will love the thought of paying less tax every year. However, that doesn’t allow tax experts to use dubious means to reduce taxes. Remember, cheating on your taxes is a crime. The IRS won’t be forgiving whenever they discover you haven’t paid your taxes correctly. Unfortunately, you will be on their radar and not the expert.  

When filing United States tax return, the best experts will only reduce your taxes legally. They won’t break the law to impress their clients in the short term. 

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