Canadian individuals who live or work in the United States may find themselves subject to US taxation laws. Whether or not a Canadian needs to file a US tax return depends on a number of factors, including residency, work, income, and the Canada-US income tax treaty.
The United States refers to non-US persons as nonresident alien individuals. A nonresident alien is required to file a US tax return when they perform any service in the United States or earns US source income above a certain threshold.
There are many situations where a Canadian individual may be living in the United States part time or making US source income. If a Canadian resident is determined to be required to file a US tax refund, they must do so as per the United States regulations.
Filing a US tax return for non residents can be intimidating. At Accountor CPA, we seek to not only simplify the process, but to fulfill all US tax filing requirements, maintain tax compliancy, and reduce double taxation wherever possible.
Filing a US Tax Return Non Resident
As a non resident, a Canadian is generally exempt from US tax filing. However, there are certain situations and thresholds set by the United States to determine if you need to file a US tax return.
These situations include if:
- You receive wages and salaries for services performed in the United States
- You own a business and it was engaged in a trade or business within the United States
- Your income is not effectively connected with a US trade or business
This includes dividends, interest, royalties, gambling winnings, pensions, annuities, scholarships, grants, and other income where not all of the US tax you owe was withheld.
- You receive rent from real estate situated in the United States
- You meet the substantial presence test
To meet this test, you must have been physically present in the United States for at least 31 days during the current tax year and 183 days (in the aggregate) during a three-year period.
You may be exempt from US tax and US tax filing in certain situations. If your total compensation for services performed in the US does not exceed US $3000 in the aggregate, you spent less than 90 days in the United States as a visitor, and you were compensated by a Canadian employer that is not engaged in a trade or business with the United States, you do not have to file a US tax return as a nonresident.
The Canada-US income tax treaty contains further exemption for residents of Canada performing some services in the United States. This treaty was designed to provide relief from taxation in Canada and the United States. If your US employment income does not exceed US $10 000, you are present in the United States for less than the 183 day aggregate period, and your remuneration is not paid by a person who is a resident in the US, you may fall under this treaty and not be required to pay tax.
It is important to note that you must still file a treaty-based return to rely on the applicable Canada-US income tax treaty provisions.
Deadline for US Tax Returns
The US tax return due date is generally July 15th, however, those outside the US must file by June 15th. If you are an international expat or a Canadian filing a US tax return, it must be done by June 15th to avoid late penalties.
The IRS will impose penalties if you do not file on time. Failure-to-file penalties are more severe than failure-to-pay penalties, and both can be applied if you miss multiple deadlines. Even if you are not able to pay your taxes, it is always recommended to file them to lower the total amount of penalties. The IRS can work with you to provide solutions or extensions if necessary.
US Tax Filing in Canada Services
Working with a tax accountant to file a US tax return in Canada is the best way to ensure full accuracy and compliancy. At Accountor CPA, we can assist you with the full process, including preparation and filing.
Our CPAs (Chartered Professional Accountants) regularly assist clients with filing US tax returns if they are required to file. We provide personal US tax return filing as well as business tax filing depending on our clients’ needs.
The US tax return for non resident services we offer include:
- Gathering relevant documents
- Preparation of U.S. federal and state income tax returns
- U.S. tax calculations
- Determining U.S. and Canada treaty benefits applicable to you
- Coordination of U.S. and Canadian deductions and credits
- Filing appropriate tax documents by mail or online as applicable
- Ensuring tax compliancy with both the IRS and CRA
- Assistance with IRS correspondence as necessary
How to File a US Tax Return from Canada and Abroad
If you meet any of the above requirements, you meet the US tax filing requirements for non residents and are required to file a US tax return.
To do this, you will need an Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN) issued by the United States government. If you do not have either of these, you will need to apply for an ITIN in order to file.
You also must obtain the relevant US tax return forms. This can either be done by mail, through an accountant or bank, or through US tax accounting software.
Finally, you must submit your US tax return by mail to the IRS in the United States in the indicated time frame to avoid penalties. Canadians submitting US tax returns as non residents are unable to do so directly online like they can when submitting taxes to the CRA (Canada Revenue Agency).
US Tax Return Forms for Non Residents
There are multiple US tax return forms that you may need to file as a Canadian. Your tax accountant can verify which forms are required for you.
1040 - US Individual Income Tax Return
This is the standard federal income tax form used to report an individual’s gross income. It allows taxpayers to claim expenses and tax credits, itemize deductions, and adjust income. It is filed by US persons including US citizens, green card holders, or residents for US federal income tax purposes (including those who pass the substantial presence test).
1040NR - US Nonresident Alien Income Tax Return
This form is for non residents who are not US citizens, have not passed the green card test, and have not passed the substantial presence test. If you made above the personal threshold income of US $3000 or do not fall into the provisions of the Canada-US income tax treaty, you will need to fill this form.
Form 8833 - Treaty Based Return Position Disclosure
If you are relying on the Canada-US tax treaty provisions to be exempt from US tax or to reduce applicable US tax withholding, you need to submit this form. Late filing of this form can lead to additional penalties from the IRS. This form will be filled alongside Form 1040.
Form 1120-F - US Income Tax Return of a Foreign Corporation
This form is for foreign corporations (not individuals) that have earnings effectively connected with trade in the United States. This is a treaty-based return that relies on the Canada-US income tax treaty as well.
US Tax Return Software for Canadian Residents
It is imperative that your tax accounting software be up to date when you are filing a US tax return as a non resident. Making errors in reported revenue, calculations, gathering documents, or expenses can lead to problems not only with the CRA (Canadian Revenue Agency), but also with the IRS (Internal Revenue Service).
An experienced tax accountant will always use the latest in cloud accounting software to ensure tax compliancy and accuracy in your return. Navigating the Canada-US Tax Treaty can be complex, even when accounting software is being used.
It is always recommended to consult with a tax accountant to choose the best US tax return software for Canadian residents who must file in the United States.
Can I File my US Tax Return Online?
Only those who qualify as residents are able to submit their US tax return online. Non residents who need to submit Form 1040NR and Form 8833 will need to mail their US income tax return to the IRS.
Should I Use A US Tax Refund Calculator?
Usually if a non resident is required to file tax returns in the United States, they will be required to pay some additional taxes. Sometimes, however, an individual or business may be entitled to a tax refund.
Using a US tax return estimator online as a non resident can often provide inaccurate calculations due to the Canada-US Tax Treaty legislation and other technicalities. It is always recommended to consult with a tax accountant that specializes in filing US tax returns for Canadians to get an accurate picture of the tax payable that you may owe.
Get Help With Your US Tax Return for Canadian Residents
Navigating the complexities that accompany individual tax filing each year can be difficult. Filing taxes in two separate countries can feel like an impossible task.
Don’t let your tax obligations to the United States overwhelm you. The tax experts at Accountor CPA have the experience you need to confidently file US taxes as a non resident. We use the latest accounting software and technology to ensure your US tax return is tax compliant. We also work to ensure you reduce double taxation and only pay what needs to be paid.
Keep more of your money. Work with the professionals at Accountor CPA for your US tax return filing preparation.
Frequently Asked Questions
When are US tax returns due?
If you are an expat or a Canadian filing a US tax return, the deadline is June 15th to avoid US tax return filing late penalties.
What is the US tax return minimum income for a non resident?
If you had an income of more than US $3000 for services performed in the United States, you will need to file income tax. Anything under this amount does not require a tax filing.
What IRS forms need to be filed?
Form 1040, Form 1040NR, and Form 8833 usually need to be filed by nonresidents filing a US tax return. A tax accountant can determine the one that best suits you or your business.
What if I’m a Canadian citizen living in the US?
If you are a Canadian citizen living in the United States, your required tax filings depend on your employment, residency, and more. Your obligations differ slightly than a Canadian filing a US tax return as a non resident. Contact us for more information.
What if this is my first time filing but I have multiple years to account for?
You will need to mail your income tax returns to the IRS as you cannot file online for previous years. It is best to work with a tax accountant to ensure your filing is correct.
Do I include Canadian mutual funds, a Canadian TFSA, or a Canadian RESP on my US tax return?
No, you only need to include income made for services performed in the United States.
