Canadian living & working in Canada as part owner of US

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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thethunderbird
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Joined: Tue Apr 02, 2013 1:26 am

Canadian living & working in Canada as part owner of US

Post by thethunderbird »

I'm a Canadian citizen living and working in Canada for an LLC based in the USA formed by myself and 4 other partners (all based in the USA). I have received my K-1 for 2012 and am not sure how I am supposed to deal with my taxes, how the treaty applies, etc. I understand there are some recent developments to how the tax treaties are applied to LLC's. Can anyone explain to me the concept of this and how it all works?
thethunderbird
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Joined: Tue Apr 02, 2013 1:26 am

Post by thethunderbird »

To add to this, the partnership conducts all of its business in the USA.
JGCA
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Joined: Thu Nov 18, 2010 3:05 pm
Location: Montreal, QC Canada

Post by JGCA »

As a Canadian receiving a distribution from a US LLC you are deemed to have received it as a dividend since LLC are looked on as corp in Canada. You simoly report teh income as dividend income on your return its the samwe as showing it as partnership income since no div tax credit applies since its from a IS company. The recent treaty chane is now that the CRA will in some cases give treaty benefits to a LLC where all its members are subject to US taxation and in this case a lowere witholding tax will apply to payments made to non residents, this is not your case as a CND resident youshow the distribution as a dividend and if there was witholding tax taken off in the US on this distribution you must make sure you tiome the income to be in the same year to be able to claim the tax otherwiise its lost.
JG
thethunderbird
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Joined: Tue Apr 02, 2013 1:26 am

Post by thethunderbird »

My K-1 lists my income as self-employment income. So in Canada I file my K-1 with my income tax and declare it as dividend earnings, correct?

I had no tax withheld for the 2012 Tax year by the LLC.

In the US do I fill out an W-8BEN so that I don't have tax withheld? From what I gather from the IRS info about the Canada-US, because I am working exclusively as a Canadian in Canada and am subject to Canadian tax, I am not subject to US self-employment tax.

BTW, this is an LLC setup as a partnership that passes through income and is not itself taxed.
thethunderbird
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Joined: Tue Apr 02, 2013 1:26 am

Post by thethunderbird »

Has anyone else had to do this? It seems like it must be fairly common...
loonietom
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Joined: Tue Apr 02, 2013 2:06 pm

Post by loonietom »

I am in the exact same situation but taxes were withheld in the US on my K-1. It's my understanding that I can get some tax credit (up to 15%) but the rest is a tax deduction.

My question is - where do we enter this K-1 information on my CAD T-1? It's not in the foreign income section so is this a T-5?
nelsona
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Location: Nowhere, man

Post by nelsona »

The K-1 income is a dividend as indicated above. The tax would be reported on the foreign tax line (upto 15% as you said), and any surplus tax put on line 256.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
loonietom
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Joined: Tue Apr 02, 2013 2:06 pm

Post by loonietom »

Thanks Nelson.

Last question - is the check box for Item K on the 1040NR -Over $250K - is that for US effectively connected income or worldwide income? All my other income is source deducted in Canada on a T-4. I assume that is not required on the 1040NR.
JGCA
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Location: Montreal, QC Canada

Post by JGCA »

If you file a 1040NR you are filing as a non resident why would you think that you had to include worldwide income, you don't.
JG
loonietom
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Post by loonietom »

My understanding as well.
Thanks very much for the quick responses.
nelsona
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Location: Nowhere, man

Post by nelsona »

... and if you are filing 1040NR to recoup US tax withheld, then you must use the fianl tax calculated on your 1040NR towards the foreign tax credit on your Cdn return, not the withheld ammount.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Post by nelsona »

... and if you are filing 1040NR to recoup US tax withheld, then you must use the fianl tax calculated on your 1040NR towards the foreign tax credit on your Cdn return, not the withheld ammount.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
loonietom
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Joined: Tue Apr 02, 2013 2:06 pm

Post by loonietom »

Makes sense. thx.
loonietom
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Joined: Tue Apr 02, 2013 2:06 pm

Post by loonietom »

Another question related to LLC ownership as a CAD resident/citizen.

If my LLC has a CAD tax credit, and not enough CAD related income to claim the credit full in the US, can any of the tax be applied against CAD income on T-1 filing?
loonietom
Posts: 7
Joined: Tue Apr 02, 2013 2:06 pm

Re: Canadian living & working in Canada as part owner of US

Post by loonietom »

**Update - Sold our company in 2017

I've sold my shares in this US company and files/paid my taxes as a 1040NR and also carried as much of the non business foreign tax credit as I could to my T-1 for 2017.

Q: It looks like I have some excess tax paid in the US that didn't get credited over and it is due to paying >15% on that long term capital gain in the US. Is any of this recoverable via a treaty between CAD and the US? Does it matter if the sale value was over a certain dollar value?

Is this a service that your team would provide?

Thanks in advance, Tom
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