Are you worried about cross-border taxation? For Canadians and US citizens living abroad, navigating cross-border tax policies can be challenging. Canadians living in America or U.S. citizens moving to Canada need a cross-border financial plan to prevent double taxation while staying tax compliant. A change in residency can be complex because you need to grasp the confusing laws of different jurisdictions. US tax regulations, in particular, are quite complex and non-compliance could lead to significant penalties. To prevent serious tax errors, as well as avoid paying double taxation, it makes sense to prepare a cross-border financial plan. This type of financial service can help you proactively manage your personal and corporate taxes to prevent tax liabilities and penalties.
Dealing with U.S. taxes can be challenging because citizens are taxable on their global income. From business earnings to investments, U.S. citizens are taxed whether they are within the United States or across borders. However, there are tax credits or deductions for taxes paid on foreign income.
Why You Need Cross-Border Tax Planning?
Cross-border taxation is typically divided into two broad categories: Inbound and Outbound. American citizens earning in other countries or transactions by U.S. taxpayers abroad are referred to as outbound transactions. On the other hand, inbound refers to non-U.S. individuals and businesses having U.S. income. It means transactions or earnings by foreign taxpayers within the United States are known as inbound. Understanding tax regulations, credits, and deductions for outbound and inbound transactions can be overwhelming and result in committing costly mistakes. However, hiring a certified cross-border tax advisor or Certified Financial Planners® (CFP® Canada & US) can help you stay tax compliant. Here are some convincing reasons to hire a cross-border tax advisor.
1. Comprehensive Cross-Border Tax Planning
Certified Financial Planners offers a complete tax planning solution to Canadians moving to the U.S. or Americans deploying capital in Canada. Besides filing cross-border income taxes, these tax professionals also assist clients to take advantage of the US-Canada Income Tax Convention. Their services include preparing tax returns for US Federal and State income tax, as well as Canadian income tax returns. Hiring a tax advisor means you adhere to tax laws in both countries. Their cross-border taxation solutions can align with your financial objectives.
2. Claim All Possible Deductions
Tax advisors have in-depth knowledge of the tax system of different countries. Professionals specializing in Canada and U.S. taxation have experience with tax filings across borders. Your tax accountant will consider all your earnings and expenses, as well as consider all available deductions to minimize payable taxes. The US-Canada cross-border tax advisors are qualified and licensed to provide tax planning services in both countries. They understand the tax laws of both countries that help in reducing your tax burden by claiming all deductions or tax credit, as well as avoiding double taxation. They also consider incentives and credits offered by the government for small businesses and start-ups.
3. Avoid Tax Penalty & Audit
Cross-border tax regulations are complex and non-compliance results in audits and hefty monetary penalties. While reviewing your tax document, if the Internal Revenue Service (IRS) finds errors, you will face the trouble of auditing your company’s finances. An audit not only disrupts your work but also harms your reputation and may lead to imprisonment of up to five years and hefty fines. To avoid all these serious issues, it is best to seek the services of a tax accountant to ensure error-free tax filing. These tax professionals stay updated with all the changing tax rules that help in avoiding errors while helping you save more money. Hiring a tax advisor not only gives you peace of mind but also improves your profitability and cash flow.