spb/ultra-sharp-agent-skills Public

1<!--2Author: Simon-Pierre Boucher3Contact: contact@spboucher.ai4-->56# Reference — US-Canada Cross-Border Personal Taxation78Figures are **tax year 2026** — verify at [irs.gov](https://www.irs.gov) / [canada.ca](https://www.canada.ca/en/revenue-agency.html) before use. Treaty = Canada-US Income Tax Convention.910## Contents11- Residency tests in detail12- Treaty tie-breaker13- Filing matrix by profile14- Foreign tax credit mechanics15- US information-reporting table16- Canadian reporting and departure rules17- Registered accounts matrix18- Worked mini-examples19- Gotchas2021## Residency tests in detail2223**US substantial presence test:** resident if current-year days ≥ 31 AND (current days + ⅓ × prior-year days + ⅙ × second-prior days) ≥ 183. Days present for a medical condition arising in the US, commuting days, and certain exempt statuses (F/J students within limits) don't count — check the exceptions before concluding.2425**Closer connection exception (Form 8840):** available only if current-year days < 183, a tax home in Canada exists, and a closer connection to Canada is shown. Must be filed timely each year — it is not automatic.2627**Canadian residency:** no day-count statute for ordinary residency; primary ties (dwelling available, spouse, dependants) dominate; secondary ties (bank accounts, provincial health, driver's licence, memberships) accumulate. A person with a home and family in Canada is resident almost regardless of travel. Sojourner rule: 183+ days physically in Canada in a year → deemed resident (before treaty).2829## Treaty tie-breaker (Article IV) — strict order, stop at first decisive step301. Permanent home available in only one country → resident there.312. Both/neither → centre of vital interests (personal + economic relations).323. Unclear → habitual abode.334. Both/neither → citizenship.345. Both/neither → competent-authority agreement.3536A treaty tie-break to Canada does not remove US **citizen** filing obligations — citizenship-based taxation survives the tie-breaker (saving clause).3738## Filing matrix by profile3940| Profile | US filings | Canadian filings |41|---|---|---|42| US citizen living in Canada | 1040 worldwide + FBAR/8938 (+ 3520s if TFSA/RESP) | T1 worldwide |43| Canadian working in US (resident by SPT, no US citizenship) | 1040 worldwide | Departure-year T1 or non-resident T1 for Canadian-source income |44| Canadian with US rental/investment income only | 1040-NR (US-source) | T1 worldwide + FTC for US tax |45| Snowbird under thresholds | Form 8840 only (no 1040) | T1 worldwide |46| Cross-border commuter (lives CA, works US) | 1040-NR on US wages | T1 worldwide + FTC |4748## Foreign tax credit mechanics49- Claim the credit in the **residence** country for tax paid to the **source** country; prepare the source return first.50- US side: Form 1116 per category (general, passive); credit limited to US tax on that foreign income; excess carries back 1 / forward 10 years.51- Canadian side: federal + provincial foreign tax credit, computed per country; limited to Canadian tax on that income.52- Social security taxes are handled by the **Totalization Agreement** (pay into one system, not both) — not by FTC.5354## US information-reporting table5556| Form | Trigger | Where/when | Penalty exposure |57|---|---|---|---|58| FBAR (FinCEN 114) | Aggregate non-US accounts > $10,000 any time | FinCEN, Apr 15 + auto Oct 15 | Severe, per-account; willful much worse |59| Form 8938 | $50k/$100k resident; $200k/$400k abroad (year-end; higher any-time thresholds) | With 1040 | $10,000+ |60| Form 3520/3520-A | Foreign trusts — TFSA/RESP risk | Separate deadlines | $10,000+ each |61| Form 8621 | PFIC (Canadian mutual funds/ETFs) | With 1040 | Punitive tax regime itself |62| Form 8833 | Treaty-based return positions | With 1040 | $1,000 |6364## Canadian reporting and departure rules65- **T1135:** foreign property with total cost > CAD $100,000 (excludes personal-use property and registered accounts).66- **Emigration:** deemed disposition of most capital property at FMV on departure (departure tax); exceptions for Canadian real property, RRSPs; election to defer with security. Date-of-departure T1 marks residency change.67- **Immigration to Canada:** cost basis steps up to FMV on arrival — document valuations on entry day.6869## Registered accounts matrix7071| Account | Canada view | US view (US person) |72|---|---|---|73| RRSP/RRIF | Deferred | Treaty-deferred; report on FBAR/8938 |74| TFSA | Tax-free | Fully taxable annually; likely 3520/3520-A |75| FHSA | Deductible + tax-free | No treaty protection — taxable; trust-filing risk |76| RESP | Deferred + grants | Taxable to US-person subscriber; 3520 risk |77| 401(k)/IRA | Treaty-deferred for Canadian residents | Deferred |7879## Worked mini-examples8081**Example 1 — SPT arithmetic.** 130 days in 2026, 120 in 2025, 90 in 2024 → 130 + 40 + 15 = 185 ≥ 183 → US resident by SPT unless Form 8840 closer connection (130 < 183 ✓) is filed.8283**Example 2 — FTC direction.** US citizen resident in Canada earns Canadian salary. Canada taxes first (source + residence); the US 1040 reports the salary and claims Form 1116 credit for Canadian tax — usually reducing US tax to zero, but the return is still mandatory.8485**Example 3 — TFSA flag.** Dual citizen holds a $40,000 TFSA of Canadian ETFs: US-taxable income annually + PFIC (8621) + possible 3520 — three problems in one account; refer to a cross-border professional and consider unwinding.8687## Gotchas88- The **saving clause** lets the US tax its citizens as if the treaty didn't exist (limited exceptions) — never tell a US citizen the tie-breaker ends their 1040 duty.89- FBAR aggregates **all** accounts (chequing, TFSA, RRSP, even signing authority) — the $10,000 trigger is total, not per account.90- Currency: US forms in USD (Treasury year-end/average rates), Canadian in CAD — convert consistently and note the rate used.91- Provincial health-card and driver's-licence renewals are residential ties — snowbirds chasing 182 days can still be Canadian-resident (that's usually the goal) but may trip US state rules separately.92- Streamlined/VDP eligibility can be lost once the authority contacts you first — timing of disclosure matters.93