spb/ultra-sharp-agent-skills Public

1---2name: handling-cross-border-taxation3description: Guides US-Canada cross-border personal tax situations — residency determination, treaty tie-breakers, foreign tax credits, dual filing for US citizens in Canada, FBAR and Form 8938 reporting, TFSA/RRSP treatment, and snowbird rules. Use when the user asks about working, moving, or living across the US-Canada border, dual citizenship taxes, tax residency in two countries, double taxation, FBAR, the substantial presence test, or whether a TFSA or RRSP is taxed by the IRS. Do not use for single-country returns (preparing-us-personal-tax-returns, preparing-canadian-personal-tax-returns) or for corporate cross-border structuring.4---56<!--7Author: Simon-Pierre Boucher8Contact: contact@spboucher.ai9-->1011# Handling US-Canada Cross-Border Taxation1213## When to use / when NOT to use14- **Use for:** determining which country can tax whom, sequencing dual filings, foreign tax credits, US information reporting (FBAR/8938), registered-account treatment across the border, snowbirds and remote workers.15- **Do NOT use for:** preparing either country's return mechanics (use the preparing-* skills once obligations are established), corporate structuring, immigration advice, or third-country situations.1617## Important limits18- Educational guidance, not professional tax advice — cross-border is the highest-referral area: renunciation, departure tax, PFIC holdings, and treaty elections go to a cross-border CPA/EA.19- All figures are stated for **tax year 2026** and MUST be verified against [irs.gov](https://www.irs.gov) and [canada.ca](https://www.canada.ca/en/revenue-agency.html) before use.20- Never assist with evasion — hiding accounts or income from either tax authority is out of scope; disclosure programs (IRS Streamlined, CRA Voluntary Disclosures) are the legal path for past non-compliance.2122## Workflow231. **Determine residency first — everything follows from it.**24   - US: citizen or green-card holder → US tax resident regardless of location (citizenship-based taxation). Otherwise apply the substantial presence test: days this year + ⅓ last year + ⅙ year before ≥ 183 (and ≥ 31 days this year).25   - Canada: facts-and-circumstances residential ties — home, spouse/dependants in Canada are primary; secondary ties (accounts, licences, health card) accumulate.262. If resident of **both**, apply the treaty tie-breaker in strict order: permanent home → centre of vital interests → habitual abode → citizenship → competent authority.273. Establish the filing set: US citizens/green-card holders in Canada file **both** every year (1040 + T1). Treaty non-residents may still owe source-country filings (e.g., 1040-NR for US-source income).284. Eliminate double tax with **foreign tax credits, claimed in the residence country, per income category** — compute the source-country return first, then credit those taxes on the residence return.295. Screen US information reporting: FBAR (FinCEN 114) if aggregate non-US accounts exceeded $10,000 at any moment; Form 8938 at its higher thresholds; Form 3520/3520-A risk for TFSA/FHSA/RESP.306. Screen Canadian side: T1135 for foreign property over $100,000 cost; departure/arrival year rules (deemed disposition on emigration).317. **Validate:** residency conclusion documented with the facts used; every income item appears on the correct return(s); FTC claimed only in the residence country; all information forms listed with their deadlines; anything involving PFICs, departure tax, or renunciation flagged for a professional.3233## Current figures (tax year 2026 — verify before use)34| Item | Value | Source |35|---|---|---|36| Substantial presence | 183-day weighted 3-year formula (min 31 current-year days) | irs.gov |37| Closer connection (Form 8840) | Escape valve if < 183 current-year days + closer ties to Canada | irs.gov |38| FBAR (FinCEN 114) | Aggregate non-US accounts > $10,000 at any time; filed with FinCEN, auto-extension to Oct 15 | fincen.gov |39| Form 8938 | $50k/$100k (single/joint) US-resident year-end; $200k/$400k living abroad | irs.gov |40| US filing abroad | Automatic extension to June 15 (interest from Apr 15) | irs.gov |41| T1135 (Canada) | Foreign property cost > CAD $100,000 | canada.ca |4243## Registered accounts across the border (flag loudly)44- **RRSP/RRIF:** treaty-recognized — US tax deferred; still reportable on FBAR/8938.45- **TFSA/FHSA:** **NOT treaty-protected** — income is taxable currently on the US return, with possible Form 3520/3520-A trust filings. A US person holding a TFSA is usually a mistake; raise it immediately.46- **Canadian mutual funds/ETFs held by US persons:** PFIC regime — punitive; refer to a professional.47- **401(k)/IRA for Canadian residents:** treaty-deferred in Canada; withdrawals sourced to the US with withholding.4849## Edge cases & failure modes50- **Snowbirds** near 183 weighted days → Form 8840 closer-connection statement, filed on time, every year.51- **Remote worker in Canada for a US employer** → likely Canadian-resident: T1 on worldwide income, US obligations depend on citizenship/source; watch payroll-withholding mismatch.52- **Departure from Canada** → deemed disposition (departure tax) on most property; date-of-departure return; refer out if large unrealized gains.53- **Past non-compliance discovered** → IRS Streamlined Foreign Offshore / CRA Voluntary Disclosures — never advise silent catch-up filing.5455## References56Treaty tie-breaker detail, filing matrices by profile, FTC mechanics, and reporting-form table: see [references/reference.md](references/reference.md).57