CROSS BORDERSOLUTIONS

& INTEGRATED WEALTH

STEFANIE KELLER, CFP PROFESSIONAL

WHAT IS CROSS BORDER & INTEGRATED WEALTH PLANNING?

Financial and Business Planning for Individuals to determine US Tax Exposure and meet Compliance Regulations to avoid negative consequencessuch as Penalties, Double Taxation (ie: Tax Traps), etc.

Cross Border Planning to structure the Assets of Individuals and Businesses to minimize US Tax Exposure

HOW DO YOU DETERMINE US TAX EXPOSURE…

1. Were You or your Spouse born in the US or were either of your Parentsborn in the US

2. How much time do you spend in the US each year

3. Do you own Property in the US and if so, what is the Value of the Property

4. Have you ever held a Green Card in the US

Most countries tax residents only. The United States taxes both US citizens (wherever they may be) and resident aliens

US TAX EXPOSURE CONTINUED

6. Are you the Beneficiary or Trustee of a US Trust

7. Are you the Beneficiary or Executor for a US Person

5. Do you have any Income from US Sources (ie: Rental Income, Employment)

8. Do you own US Stocks or US Property valued at $100k or more

WHY DOES IT MATTERThe provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts. FATCA focuses on reporting:

1. By U.S. taxpayers about certain foreign financial accounts and offshore assets 2. By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

Under FATCA, all Financial Institutions and Investment Companies in Canada must collect

Information on Citizenship and report that Financial Information annually

As of July 1st, 2014 all Financial Institutions and Investment Firmsin Canada are releasing information to CRA on US Persons

Under the Inter-governmental Agreement signed with the USCanada is releasing taxpayer information to the IRS.

WHAT IS A US PERSONThe term ''United States person'' (US person) includes a US citizen or resident alien of the United States, as well as domestic corporations, estates, and partnerships. Itextends to trusts controlled by a US person or over which a US court has primary jurisdiction

US CITIZEN

An individual is a US citizen if born in the United States, Puerto Rico, Guam or the USVirgin Islands.A person born outside the US with at least one US citizen parent MAY be a US citizen. Numerous factors can affect the determination, including date of birth,application before or after age 18, years the US parent resided in the US, parents’ marital status, and more. Generally a citizen must make an intentional positive action in order to lose/end citizenship.

An application and grant of citizenship in another country does not automatically revoke US Citizenship

RESIDENT ALIEN OR NON-RESIDENT ALIEN

The US uses the term alien to mean a person who is neither a US citizen nor a US national (this latter term applying to those born in certain US protected territories).

A resident alien is effectively subject to the same tax reporting obligations as a US citizen, whereas a non-resident alien is generally only subject to tax on US-source income.

A person will be considered a resident alien if either of two tests is met:

1. the Green Card Test or 2. the Substantial Presence Test

SUBSTANTIAL PRESENCE TEST

Each time your Cross the Border, your # of Days in the US is calculated intomeeting the Substantial Presence Test.

The Substantial Presence Test confirms Resident Status and a Tax Filing Requirement

183 Days in the Current YearPlus 1/3 of the Days from the Previous YearPlus 1/6 of the Days from the Previous 2 Years

GREEN CARD TEST

A person is a resident alien by virtue of the green card test if the person has been given the right to reside permanently in the US as an immigrant, generally by the U.S. Citizenship and Immigration Services (USCIS) issuing Form I-551, also known as a ‘green card’.

Resident status continues unless it is terminated by USCIS, or the person makes a voluntary renunciation in writing. Accordingly, the US may consider the person to be a resident alien for tax purposes, despite that the person no longer resides in the US.

Closer Connection to Canada Form- IRS FORM 8840

Example: If you maintain your Principle Residence in Canada and live/ work primarily in Canada you can file a Closer Connection to Canada Form annually with the IRS to address Residency Exposure

Despite meeting this test, a person may be treated as a non-resident alien if proof is provided to show a closer connection to a foreign country, using IRS Form 8840 (Closer Connection Exception Statement).

WHAT DO YOU HAVE TO FILE?

1. Individual Tax Returns from 2011 to Present including Foreign Corporate Disclosurefor Business Owners/ Shareholders in Foreign Corporations

2. FBAR’s (FinCEN Form 114)- Report On Foreign Bank And Financial Accounts for previous 6 years

UNDER THE STREAMLINED APPROACH

3. Statement Of Specified Foreign Financial Assets” for Accounts valued at $200k USD or greater

.

FILING THE US TAX RETURN

Form 1040 is used for individual income tax return fling. An annual income tax return must be filed for any tax year in which gross income is equal to or greater than the applicable exemption amount and standard deduction.

Form 1040 is used in combination with other Forms and Schedules to file an Individual Tax Return

The individual filing deadline for Out of Country Individuals is June 15th

FILING THE FBARA US person who holds at least $10,000 in foreign financial accounts (including certain foreign non-account investment assets) must make an annual filing, irrespective of income.

The online form is Form 114 Report of Foreign Bank and Financial Accounts (FBAR).

The FBAR must be filed annually with Financial Crimes Enforcement Network (FinCEN), a bureau within the US Department of the Treasury.

It must be received by June 30 (for reporting the preceding calendar year).

Penalties: Up to $10,000 initially, and up to $60,000 for continuing failure after IRSnotice. Criminal penalties may also apply.

THE OFFSHORE VOLUNTARY DISCLOSURE PROGRAM (OVDP)

The stated IRS objective is to bring taxpayers that have used undisclosed foreign accounts and assets, including those held throughundisclosed foreign entities, to avoid or evade tax into compliance with United States tax and related laws.

On an OVDP filing, the IRS may waive the most severe penalties, and criminal sanctions may be avoided. However, taxes, interest andsome penalties will still apply.

FILING THE SPECIFIED FOREIGN ASSET DISCLOSURE

Under FATCA, US taxpayers who hold an aggregate of $50,000 in foreign accounts will be required to file a new Form 8938 Statement of Specified Foreign Financial Assets with their annual tax return

The threshold reporting requirement for non residents is $200,000,

Penalties: Up to $10,000 if non-wilful; if willful, up to the greater of $100,000 or 50 percent of account balances. Criminal penalties may also apply

PASSIVE FOREIGN INVESTMENT CORPORATION (PFIC’S)

(PFIC) rules force disclosure of information about and income details forcertain foreign investment structures owned by US persons.

Due to an IRS policy change in 2010, non-US mutual funds held by USpersons are now considered PFICs.

NON-REGISTERED CANADIAN MUTUAL FUNDS

A U.S. person holding a Canadian mutual fund is required to annually report such holdings to the IRS using Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.

Failure to do so will likely result in the gains on disposition to be taxed at the highest US tax rate at the time, with interest levied for implied underpaid taxes during the holding period

**Where a Canadian mutual fund is held within a RRSP/RRIF, the Form 8621 disclosure and filing obligation will not apply so long as the Form 8891 filing is kept up-to-date.**

REGISTERED PLANS (RRSP’S, RIF’S, LIRA’S, LIF’S)

To benefit from the tax-sheltering in a RRSP/RRIF, a US person must annually file Form 8891 U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans.

Form 8891 details the:

1. Contributions to a RRSP;2. Undistributed earnings; and3. Distributions from a plan

TFSA’S, RESP’S AND RDSP’S

TAX FREE SAVINGS ACCOUNT

REGISTERED EDUCATION SAVINGS PLANS

REGISTERED DISABILITY SAVINGS PLANS

* ARE NOT TAX SHELTERED IN THE US AND THE GROWTH IS TAXABLE *

AVOID INCOME TAX TRAPS

1. Tax Free Savings Accounts (TFSA)

2. RESP and RDSP’s

3. Check Foreign Tax Credit/ Foreign Income Exclusion before making RRSP contributions ($100,800 max for 2015)

4. Life Insurance UL (Permanent Side Funds) are Taxable in the US and Exempt in the US

5. PFIC Cleanse

BUSINESS OWNERS AND SHAREHOLDERS OF CANADIAN CORPORATIONS

Are required for file Form 5471 Information Return of U.S. Persons With RespectTo Certain Foreign Corporations and associated Schedules annually and attach to their Individual Tax Return

This is a very complex form and requires analysis of the Canadian Corporate Financial Statements.

NOTE: All amounts are required to be reported in USD and the foreign exchange conversion must be detailed (amounts to be shown in Functional Currency and USD)

FAILURE TO FILE- “What are the Consequences?”

Failure to File Penalties and Interest issued by the IRS

Difficulties Crossing the US Border

Severe Penalties and possible Criminal Charges for Non-Disclosure of Foreign Assets

HOW CAN WE HELP…Analyze your US Tax Exposure

Assist with the collection of the necessary information to file the Tax Returns and FBAR’s

Assist with obtaining Social Security Numbers, Individual Identification NumbersEmployer Identification Numbers

Prepare your US Tax Forms and FBAR’s

Re-Structure your Personal and Business assets to minimize US Tax Exposure

Prepare Estate Plan to protect your Assets in Canada/ US to minimize EstateTax, Fees and Complications.

CROSS BORDER SOLUTIONS& INTEGRATED WEALTH PLANNING

WWW.KELLERFINANCIAL.CA

Interactive Screening Tool for US Tax Exposure

Interactive Software for US Tax Self Filing specific to Cross Border Canadian Tax Payers.

NOTICE:

This presentation is the property of Keller Financial & Business Planningand Cross Border Solutions & Integrated Wealth

It may not be reproduced or distributed without permission.