U.S. social security benefits – If you are a Canadian resident who has received U.S. social security benefits since before 1996 (or you are a spouse or common-law partner who is eligible to receive survivor benefits), for benefits received after 2009, you have to include only 50% of the benefits in your income.
Canadian RESPs – If you are a U.S. citizen, green card holder or U.S. resident alien in 2010, consult with your PwC adviser if you have an RESP or before contributing to an RESP.
Canadian Tax-Free Savings Accounts (TFSA) – If you are or became a U.S. citizen, green card holder or U.S. resident alien in 2010, contact your PwC adviser about your TFSA or before setting up a TFSA. It appears that investment income earned in a TFSA will be taxable for
S. purposes in the year it is earned.
S. source income – If you received income in 2010
from U.S. sources that may be subject to U.S. federal and/or state tax (e.g., employment and self-employment income earned in the U.S., income and losses from participation in U.S. limited partnerships, and rent from U.S. real estate, including short-term rentals of vacation homes):
determine whether the income should be reported on a U.S. non-resident return; and
if U.S. tax was deducted at source on the income during 2010, determine whether: the tax withheld was appropriate; you should file a U.S. non-resident return to obtain a full or partial refund; and the U.S. tax can be claimed as a credit on your Canadian tax return.
U.S. taxpayers with Canadian shareholdings or investments – If you are a U.S. citizen, green card holder or resident, or plan to become a U.S. resident, and own shares of a Canadian private corporation or units of a Canadian partnership, determine if you have additional
S. income tax reporting requirements or exposure to
S. income tax or double taxation, and how to minimize
it. Penalties that are normally assessed based on the IRS’s discretion may automatically apply to certain late-filed information returns on foreign investments and foreign financial accounts reporting. New rules require U.S. persons who are shareholders of passive foreign investment companies (PFICs) to file an annual information return in 2011.
U.S. family members – If you have a U.S. citizen or U.S. resident family member who is a direct shareholder in your company or a beneficiary under a family trust, determine any exposure to double taxation and how to minimize it.
U.S. federal income tax return/treaty-based tax return – Determine whether you are conducting activities in the United States that require you to file U.S. federal income tax returns or U.S. treaty-based tax information disclosure returns.
U.S. real estate – If you sold U.S. real estate (including shares of a U.S. company having 50% or more of its value attributable to U.S. real estate) in 2010, or may sell U.S. real estate, determine your U.S. income tax reporting requirements and exposure to U.S. real property withholding tax (and how to minimize it) and U.S. federal and state income taxes.
U.S. exit tax – If you plan to relinquish your U.S. citizenship or green card, ask your PwC adviser how you are affected by U.S. rules that impose a U.S. exit or “mark- to-market” tax on certain types of properties.
Proposed U.S. personal tax rate changes – Be aware that U.S. personal tax rates (for the top two income tax brackets) on long-term capital gains and other income may increase in 2011. As a result, consider the combined Canadian and U.S. tax impact of accelerating income to 2010.
State and municipal taxes – Ensure you are complying with all state and municipal laws and taxes. Even if a Canadian business is exempt from U.S. federal income tax under the Canada-U.S. tax treaty, it may be subject to state income, franchise, sales and use, property and other taxes. Contact your PwC adviser for help with multi-state taxation and filing requirements.
U.S. international tax reform – Key international tax changes enacted by the U.S. government:
limit the ability for U.S. taxpayers to claim foreign tax credits in certain situations;
terminate the special 80/20 rules for interest and dividends received from persons meeting the 80% foreign business requirements;
introduce penalties for U.S investors that fail to report their investments in passive foreign investment companies (PFICs); and
codify the economic substance doctrine.
These changes may significantly affect how U.S. and Canadian multinationals structure the holding and financing of their U.S. and foreign operations. Contact your PwC adviser to discuss these and other tax developments that could have a bearing on your U.S. cross-border business activities.