Taxation of Canadians in America. David Levine

Чтение книги онлайн.

СКАЧАТЬ When to file your Individual Income Tax Return (Form 1040)

      The normal due date for filing individual income tax returns (Form 1040) is April 15 of the year following the tax year. If this date falls on a weekend, the due date is the Monday following the weekend. You can get an automatic six-month extension of time to file your return by filing Application for Automatic Extension of Time to File US Individual Income Tax Return (Form 4868) by the due date, typically April 15. By filing this form in a timely fashion, your time to file will be extended to October 15.

      An extension provides only an extension of time to file, not pay your taxes. You must calculate and pay any taxes due by April 15 (or the adjusted date) to avoid penalties. If you are required to make estimated (installment) tax payments, you must make those payments even though your return is on extension.

      Not all forms that you may need to file have the same due date. Those forms will in turn have their own forms to complete for an extension for that form, and that form only. Not only do some forms have different due dates, some forms do not allow for an extension of time to file. For example, the Annual Information Return of Foreign Trust with a US Owner (Form 3520-A) for reporting foreign trusts is due on March 15; and Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns (Form 7004) is required for the six-month extension, which means that the ultimate filing deadline is September 15, not October 15 like most of the rest of your return. Also, Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1) is due June 30 and cannot be extended.

      Filing an extension does not increase your chance of being audited. If fact, if you cannot get your tax information to the accountant early in the season, you may want the accountant to file an extension so that the accountant can prepare the return after April 15 when there is less pressure and he or she hasn’t been working 12- to 16-hour days for the previous two months!

      5.2 Electronic filing

      Paid preparers are now required to file all tax returns electronically, when possible. However, some returns have forms or situations that have not yet been approved for electronic filing. When electronically filing, your accountant will require you to sign the US Individual Income Tax Transmittal for IRS e-file Return (Form 8453).

      5.3 Penalties and interest for underpayment, late filing, and late payment

      If it is determined later (by you or the IRS) that the amount of tax owed is greater than the tax paid when the return was filed, there will be interest due on the underpayment of tax. The interest rate can change quarterly, but it is currently 3 percent for underpayments. The interest is compounded daily.

      If you file your return late without a reasonable cause, the IRS will impose a penalty of 5 percent per month, with a maximum penalty of 25 percent. If your return is more than 60 days late, the IRS imposes a minimum penalty equal to the lesser of $135 or 100 percent of the tax due. If the failure to file is fraudulent, the monthly penalty is 15 percent, with a maximum penalty of 75 percent.

      If you are late in paying your taxes, the penalty is .5 percent per month, with a maximum penalty of 25 percent. This penalty is in addition to the regular interest charge. This penalty may be doubled (to 1 percent) if after repeated requests to pay and a notice of levy, you do not pay.

      As mentioned earlier, the IRS allows you to file for an automatic extension of time, giving you until to October 15 to file your return. However, you must still pay the tax by April 15. There is an exception to the late payment penalty if you paid at least 90 percent of the total tax owed by April 15.

      If both the late payment and late filing penalties apply, the .5 percent penalty for late payment (but not the 1 percent penalty for continued nonpayment) will offset the penalty for late filing, during the period that the penalties run concurrently.

      5.4 Filing status

      There are five filing statuses in the US; single, married filing jointly, married filing separately, head of household, and qualifying widow or widower. In Canada, couples file their own separate returns, in the US married couples can, and typically do, file a joint return where both spouses report all of their income and deductions on a single return. Married couples may choose to file separately, but not as singles.

      Note: As of this writing, six states recognized same-sex marriages. Marriage licenses are granted by these six states: Connecticut, Iowa, Massachusetts, New Hampshire, New York, and Vermont, plus Washington, DC and Oregon’s Coquille and Washington’s Suquamish Indian tribes. Common-law marriages are allowed in the following states plus the District of Columbia: Alabama, Colorado, Iowa, Kansas, Montana, New Hampshire, Oklahoma, Rhode Island, South Carolina, Texas, and Utah. As mentioned previously, the IRS will recognize common-law marriages, and will allow the couple to file as married filing jointly. In addition to the states listed, couples from other countries that recognize common-law marriages, such as Canada, will also be recognized by the IRS.

      While it is usually beneficial for married couples to file jointly, there can be circumstances where filing separately might be beneficial. The most common situation in which a couple might consider filing separately is when one spouse has many more deductible expenses than the other spouse, such as medical expenses where the deduction is limited to the amount that exceeds 7.5 percent of income.

      For example, assume in this very simplistic example that Jane has income of $100,000 and her husband Bob has income of $30,000. Bob also had $10,000 of medical expenses, whereas Jane had no medical expenses. If Jane and Bob were to file jointly, they would have $130,000 of income and their medical expenses would be limited to $250, the amount above 7.5 percent of $130,000 (130,000 x 7.5% = 9,750). In other words, the first $9,750 would not be deductible. On the other hand, if they filed separately, Bob would be allowed to deduct $7,750, as only $2,250 would not be allowed (30,000 x 7.5% = 2,250).

      6. Notifying the IRS about Your Change of Address

      The IRS will send all correspondence to your last known address; this includes any claims of refund or deficiency notices. Keeping the IRS up to date on how to contact you is important because your refund may be delayed otherwise. If you owe the IRS money, simply changing your address and not telling the IRS does not help; the IRS can enforce a deficiency even if you never received the notice, as long as the IRS sent it to your last known address.

      To update your address, you can call the IRS at 1-800-829-1040 or by filing a Change of Address (Form 8822), or by correcting the address on an IRS correspondence and returning it with the correct information. We recommend filing the form rather than calling since the 800 number above is the general number and you will be on hold for a very long time. When filing Form 8822, we recommend that you send it by registered mail so that you have proof it was sent and received.

      2

      Your First Year in the US

      Your first year in the US will be full of questions about everything from how do I get to where I am going and where can I go to watch a hockey game, to when are US taxes due and what is deductible for US tax purposes? While we can’t help you with the first two questions (though if you are ever in one of the cities where we have an office, we would be happy to share a hockey game with you), we will address most of your tax questions in this book. In this chapter, we will address topics such as when you become liable for US taxes, how you get a tax ID number, and identify some of the special СКАЧАТЬ