Matt C. Altro and Jonah Z. Spiegelman were recently interviewed by Dean DiSpalatro from Advisor’s Edge to analyze a case study about cross-border traps. The analysis was published in the June edition of the Advisor’s Edge magazine and also appeared online on Advisor.ca.
In the article, Matt and Jonah review what mistakes “Rob” has made as an American who has moved to Canada and what he should have done to be tax compliant in both countries among other cross-border traps that he fell into. Click here to view the article online or scroll down to read an excerpt from the piece.
Client caught in cross-border trap
June 6 2014
Rob Petrovick, 55, works in communications for a large, Toronto-based corporation. He makes $150,000 a year. Born in Florida, he moved to Canada 21 years ago; a year later he married Maria Santos, and they’ve been together since. They have no children.
Maria’s a family physician with her own practice. It’s structured as a corporation and she and Rob have been drawing dividends for 20 years.
Rob’s dutifully filed tax returns in Canada and the U.S. But a recent conversation with a friend revealed he’s one of many Americans living in Canada who hasn’t been getting them right due to poor financial advice.
Rob made three mistakes.
1. He opened a TFSA in 2009 and has been contributing the maximum. “It’s not considered tax-free from a U.S. perspective,” says Matt C. Altro, partner and cross-border financial planner at Altro LLP. That means Rob must report the investment income to the IRS. He hasn’t been doing this.
What’s making matters worse is that the IRS views TFSAs as foreign trusts.
“And that,” Altro says, “means Rob has to file Form 3520 and 3520-A every year.” But he hasn’t been doing that either.
Jonah Z. Spiegelman, a partner at Altro LLP, says Rob’s error is partly a result of not having a cross-border expert coordinate returns for both countries. Please click here to read the rest of the article.