Tax on U.S. income
Posted date : May 13, 2019.
The information in this section of CSANews is always very useful to snowbirds and others with some connection to the U.S. Could you please clarify your response to a recent letter in which you state that, “if you earn income in the U.S. you do have to file a U.S. tax return.”
According to the Tax Convention between Canada and the U.S., there is the provision, for instance, that “Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.” Does that not suggest that the income derived from the U.S. can be declared in a Canadian tax return and the tax paid in Canada instead of the U.S.? One of the purposes of the Convention is to prevent double taxation, i.e. paying tax twice on the same income amount.
If you earn ANY income in the United States, you are required to file a U.S. tax return. This includes rental income for leasing your condo or park model, as well. There is a very effective tax treaty between Canada and the United States and, in most cases, you will be able to recoup any U.S. taxes which you pay on your Canadian tax return. We are aware that many people do “under the table” rental deals “Canadian to Canadian,” but we do not recommend that. If you are caught, the penalties can be severe. The taxes payable are usually minimal after deductions anyway, so have a chat with a U.S. accountant.