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Taxation of U.S. Citizen physicians in Canada
1. TAXATION OF U.S. CITIZEN PHYSICIANS IN CANADA
PLANNING CONSIDERATIONS AND REQUIREMENTS
Presented by Hutcheson and Co. LLP and MD Financial Management
2. ABOUT US
Hutcheson & Co established in 1987
Full service tax and accounting solutions including cross
border tax specialties
5 Partner firm with an excellent team of 23 staff
members
Located inVictoria BC –Yates and Cook Street
3. TOPICS
Phil Hogan - Introduction
Ammo Baines – CanadianTax Structures for Physicians
Brent England – USTax Considerations and
Requirements
Phil Hogan –Wrap Up and Questions
4. GENERAL USTAX REQUIREMENTS
US Citizens are required to file US 1040 income tax
returns regardless of where they live
Other foreign financial and tax reporting is required
Canada-US tax treaty helps eliminate double taxation
Penalties can be high for non-compliance and late filing
of specific tax forms
5. TAX FILING REQUIREMENTS FOR US
PERSONS
Annual Filing Requirements
T1
1040
FBAR (foreign bank account reporting – form 114)
Related treaty disclosures
FamilyTrust
3520-3520A
Private Corporate ownership
5471
Subpart F income (investment income)
9. COMMON CANADIANTAX STRUCTURES
Add Spouse
Voting shares for Physician
Non-voting shares for Spouse
Features
participating vs non-participating
16. PLANNING CONSIDERATIONS
Corporation – PFIC vs CFC and subpart F
PFIC Income
50/50 holding companies may be considered a PFIC
PFIC definition - 50% of inactive assets or 75% of inactive income
Punitive taxation
Controlled Foreign Company (CFC) and Subpart F Income (cannot be a PFIC)
Investment income in excess of dividends paid
Move investment assets to Holdco (not owned by US Citizen)
Income splitting
Spouse and children
Ability to use lower marginal rates
17. PLANNING CONSIDERATIONS (CON’T)
Tax deferral
Retain assets in corporation to defer higher personal tax rates
Sale of practice
Capital gains exemption below $800,000
May not be easy to sell
18. AVOID PENALTIES!
Late FBAR (form 114) - $10,000
Late 5471 - $10,000
Late 3520A/3520 – Greater of $10,00 and % of trust
property
T1135 - $25 a day to a max of $2,500 plus interest
Penalties on overdue tax payments
19. QUICK CHEAT SHEET
File your 1040 and FBAR on time each year
Review implications of holding Canadian mutual funds
Ensure proper planning to avoid PFIC and Subpart F income
Use structures specific to needs
Invest in proper tax planning to help minimize future tax and avoid
costly tax problems
Be aware of US tax requirements and exceptions
Penalties can be avoided with proper planning
21. CONTACT US
Name Email Phone Number
Brent England CPA, CA, CPA
(Colorado)
brent@hutcheson.ca 250-381-2400
Phil Hogan CPA, CA, CPA
(Colorado)
phil@hutcheson.ca 250-381-2400
Terry Dyer CPA, CA, RTRP terry@hutcheson.ca 250-381-2400
Ammo Baines BBA, CPA, CA ammo@hutcheson.ca 250-381-2400