What to Consider When Hiring Tax Advisors

As an entrepreneur, you need a reliable tax advisor to keep your wealth and protect your business’s future. Tax advisors are financial experts with extensive tax law and tax accounting knowledge. To reduce your tax payable, you will need these professionals. They can use their knowledge and skill to provide much-needed solutions and legal tax deductions.

Since remitting your taxes is sensitive, you must hire the best tax advisor. Besides filing taxes, such an expert will make the preparation of tax documents easier, especially when you register a company in US. Here are factors to consider when hiring tax advisors.

Hire a Creative Accountant

Tax advisors are responsible for providing solutions to your tax issues. To tackle these problems, they must think outside the box. Thinking in straight lines won’t enable them to find legal and practical ways of dealing with some issues.

The best tax specialists study clients’ situations to understand their needs and business. With this understanding, they will advise the client on how to plan taxes and reduce tax payments.

Hire a Tax Expert that Asks Questions

In your first interview, the tax advisor must use that opportunity to understand your tax situation. The expert should uncover your tax problems to determine suitable solutions for your case. So, the specialist must ask many questions.

Via these questions, you might get more deductions via foreign tax credit and other legal means. Also, the expert can expose errors likely to cause an issue with the IRS. So the advisor will prevent you from breaking the tax law.

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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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Efficient Tax Planning and Preparation Ideas for This Year's End

The Canadian corporate tax season may be quite difficult for you if you manage a small company or the assets of a larger enterprise. Each document may show lost cash possibilities or irrational expenses that, in these challenging economic times, might make a massive difference. Consult the list of practical tax preparation firms that assist businesses in avoiding paying higher taxes and being caught in the same situation the following year.

Adopt Technology

Your organization will unnecessarily lose money if you ignore using tax accounting software and technology. Employing a cost-effective, skilled computer program may result in enormous savings on anything from labour expenses to fines for late or erroneous returns.

Invest in Quality Filing Systems

The stereotype of a small- to medium-sized entrepreneur with a tiny box overflowing with bills and invoices—not to mention an irate accountant—is well known. There is a rationale why society makes light of this situation: everyone interested in growing their firm should be thoroughly knowledgeable about its economics. Building an error-free, simple-to-use file system is the best way to keep track of your finances if you are usually poorly organized or quickly overwhelmed.

Maintain Professionalism

When it comes to sophisticated tax matters such as cross-border tax solutions, you should seek the advice of professional tax accountants to guide you. To help you run your company profitably throughout the year, the professionals are available to provide advice and direction. Remember, being professional also implies creating a clear distinction between personal and corporate taxes.

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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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A Brief Review of US Foreign Tax Credit Conditions

 

Expatriates from the United States have a few constraints when it comes to claiming foreign tax credits. These limitations include:

·       Mandatory Tax Imposition: You will not be eligible for the FTC if you do not pay taxes in your resident country. In other words, if you're in Canada and have automatic deductions for Canadian income taxes taken out of your paycheck, it's considered a tax on your earnings, hence eligibility.

 

·       Only Legal and Genuine Foreign Tax Liabilities Qualify: It's quite obvious what this means. When paying taxes to a foreign country, make sure that the tax is lawful and that you are required to pay it before you may claim a foreign tax credit.

·       The Foreign Tax Has To Be Paid Or Incurred By You: In order to qualify, you must have paid the tax, accrued it, or be liable for paying it.

·       It Has To Be an Income Tax: One must have paid income taxes to a foreign jurisdiction in order to be eligible for the FTC. According to the IRS, certain foreign tax categories are ineligible for the FTC, including

a)  Income that has been exempted from taxes, for instance, if you have already taken advantage of the Foreign Earned Income Exclusion.

b) Taxes accrued to a foreign government that has a social security pact with the United States.

You may be eligible for the credit if you file a non-resident tax return and pay or accumulate tax to a foreign nation or U.S. possession on income from overseas sources that is inextricably linked to a trade in the United States.

 

Fantastic points to consider when choosing professional accounting services

 

When tax season approaches, a lot of stress can build up. This is because you are required to fulfill your legal obligations and pay taxes. However, sorting out the documents and knowing the right taxes to file can be quite taxing. Instead of suffering, you can opt to outsource tax services from a reliable accounting firm. This will help you enjoy all the benefits of paying taxes without being too stressed. Before you hire a professional, some of the points to consider include:

●        Licensing and proper credentials - Before you hand over your credentials for tax filing, you should take a deeper look at the company. Are they licensed by the body in charge of accounting professionals in your country? Do the employees have any certification or training in accounting and finance? Do they have a good idea of tax laws in your region? Having this information will boost your confidence and prevent you from paying fines for wrongful filing.

●        Experience - When opting for an accounting firm to handle your taxes, you want to settle for a firm that has numerous clients. The more knowledge they have about different tax systems, the better for you. They should have dealt with the situation beforehand. For example, the company should have prior experience dealing with the Canadian tax system if you want to file a Canadian Corporate Tax claim. This will save you time and money

●        Services offered - Before you commit to a company, knowing what they do is important. Some companies only offer services for specific situations such as corporate taxes while others offer a variety of services. Finding a company that offers the specific service you are looking for such as Expat Tax Return assures you that they know what they are doing. They will be able to provide you with all the requirements and the appropriate forms for your taxes.

What You Should Know About Section 216

When you get rental income from immovable or real property in Canada, the tenant or agent must withhold non-resident tax of 25% on gross rental income credited or paid to you. The tax should be paid on or before 15^th of every month that the rental income is credited or paid. You must ensure that that the payer withhold or remits the right amount of non-resident tax to the CRA on your behalf.  If this non-resident tax is not remitted or withheld, the CRA will charge compound daily interest on the total amount not remitted or withheld. In addition, you may also be charged a penalty on your Tax treaty returns.

The non-resident tax that is withheld is considered as your final tax obligation to Canada for any rental income. However, you can choose to pay less by electing under section 216 of the Income Tax Act. Additionally, you may get a refund of all or some of your non resident tax return withheld if you choose to elect under section 216.

Section 216 Election

If you are a non-resident owing property in Canada, you can opt to send the CRA a separate Canadian tax return that reports your rental income from immovable or real property in Canada. The decision to send the CRA this return is referred to as electing under section 216 of the Income Tax Act. The Income Tax Return for Electing Under Section 216 is different from any other tax return you will send to the CRA for the year. For expats who have rental income from more rental properties in Canada and make an election under section 216, you need to report all your Canadian rental income and expenses on one section 216 return.

Reasons for Electing Under Section 216

When you choose to elect under section 216, you can pay tax on your net Canadian rental income rather than on the gross amount. If the non resident tax return that the payer withheld tends to be more than the actual amount of tax payable on your section 216 return, then the CRA will refund the excess money to you.