With the ever changing and evolving situation concerning COVID-19, and the impact it has on every day life of individual taxpayers and businesses, governments globally are trying to provide much needed assistance to ease the anticipated financial hardship.
The U.S. Federal government extended the personal and corporate tax filing deadlines by 3 months to July 15th, 2020 from the usual deadline of April 15th. In addition, Treasury Secretary Steven Mnuchin has announced that the U.S. Federal government is providing taxpayers with an additional 90 days, to July 15th, 2020, to pay their income taxes for up to US$1 Million owed for individuals and up to US$10 Million for corporations for 2019. The IRS has also created a special webpage to update taxpayers on any relevant tax information and updates as it relates to Corona Virus https://www.irs.gov/coronavirus.
The IRS has also extended the quarterly estimated tax payments by 90-days, as those were due on April 15th. Self-employed individuals and businesses owners in the U.S. are required to pay estimated tax payments on a quarterly basis.
It is important to note that certain U.S. States have also extended their 2019 personal tax filing deadlines and have established extended timelines for paying the state taxes owed for 2019.
As a reminder, any U.S. citizens, residents or green card holders living in the U.S. or abroad have an obligation to file personal income tax returns and report their world-wide incomes. Generally, U.S. citizens living abroad always had an automatic 2-month extension to June 15th to file their U.S. Federal income tax returns, however, payments paid after April 15th incurred interest. This year U.S. citizens living outside of the U.S. have until July 15th to file their returns and to pay their balance due provided they are below the $1 Million threshold noted above.
In addition to the annual personal income tax filing requirement, U.S. citizens, residents and green card holders, that have a financial interest in or signature or other authority over at least one financial account located outside the United States and the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported must complete and file Report of Foreign Bank and Financial Accounts (FBAR or FinCEN114). The usually deadline to complete and file the form is April 15th, however, there is an automatic extension to October 15th for any taxpayers that are unable to meet the April 15th deadline.
A few others key points on U.S. tax filing requirements that we would like to remind our clients
The personal income tax filing obligation in the U.S. does not just apply to U.S. citizens and green card holders.
With many Canadians residents owning investment/rental properties in the U.S., those individuals have annual personal non-resident filing and reporting obligation in the U.S., this would apply at both the Federal and State levels, depending on the State rules, regulations, and location of the property. In addition to the annual income reporting, Canadian residents selling U.S. properties (both investment or personal use) are subject to a 15% Federal FIRPTA withholding requirement and must file personal income tax returns to report the disposition of the property. The 15% withholding requirement could be reduced or waived, by timely filing of specific forms with the IRS, prior to the closing date of the property.
Canadians commuting to work in the U.S. on a daily or weekly basis due to the proximity to the border, likely have U.S. personal tax filing obligations. Although Canada and the U.S. have a Tax Treaty in place to provide relief for double taxation, it is important to understand that the Treaty provides relief against tax liability but not tax reporting and filing requirements. There is no minimum day threshold to eliminate the need and requirement to file a U.S. tax return, however, Treaty relief is available to reduce the overall tax liability.
If you have any questions about your U.S. tax obligation or cross-border concerns our team at Welch would be happy to assist.