Individuals With Overdue Canadian Or U.S. Returns
IRS Compliance Requirements:
- Review all delinquent U.S. federal income tax returns and determine which years require filing.
- File overdue Form 1040 or Form 1040-NR, as applicable, based on the taxpayer’s U.S. citizenship, residency, and filing status.
- Review overdue FBAR (FinCEN Form 114) filings for foreign financial accounts that met the applicable reporting requirements.
- Review overdue Form 8938 (FATCA) filings for specified foreign financial assets exceeding the applicable thresholds.
- Review overdue Form 5471 filings for interests in certain foreign corporations.
- Review overdue Form 8865 filings for certain foreign partnerships.
- Review overdue Form 8858 filings for certain foreign disregarded entities and foreign branches.
- Review overdue Form 8621 filings for investments treated as PFICs for U.S. tax purposes.
- Review overdue Forms 3520 and 3520-A for certain foreign trusts and reportable foreign trust transactions.
- Review other applicable international information returns based on the taxpayer’s foreign corporations, partnerships, trusts, investments, pensions, and financial accounts.
- Determine whether the taxpayer is eligible for the IRS Streamlined Filing Compliance Procedures, where applicable.
- Consider the IRS Voluntary Disclosure Program where the taxpayer’s circumstances do not qualify for streamlined procedures and the disclosure involves potentially willful noncompliance.
- Consider the Delinquent International Information Return Submission Procedures where applicable and where the taxpayer meets the relevant IRS requirements.
- Review whether amended returns are required for previously filed years.
- Calculate outstanding U.S. income tax, interest, and applicable penalties for delinquent returns.
- Review foreign tax credits, including Form 1116, to determine whether Canadian taxes paid can reduce U.S. tax liability.
- Review Canada–U.S. Tax Treaty provisions and applicable elections when correcting prior-year filings.
- Reconcile prior-year W-2s, 1099s, 1042-S forms, foreign income, brokerage accounts, bank accounts, and other financial records.
- Review potential FBAR, FATCA, information-return, and income-tax penalties and determine whether penalty relief may be available.
- Maintain a complete record of all previously filed returns, IRS correspondence, payment records, disclosure submissions, and supporting documentation.
CRA Compliance Requirements:
- Review all outstanding T1 General income tax returns and determine which tax years require filing.
- Determine the taxpayer’s Canadian tax residency status for each outstanding year, particularly where the taxpayer lived or worked outside Canada.
- File overdue T1 returns and report worldwide income for years in which the individual was a Canadian resident.
- Review overdue Form T1135 (Foreign Income Verification Statement) filings for specified foreign property exceeding the applicable reporting threshold.
- Review overdue Form T1134 filings where the taxpayer had reportable interests in foreign affiliates.
- Review overdue rental income filings, including Section 216 returns where applicable for non-resident owners of Canadian rental property.
- Review Canadian non-resident withholding requirements for rental income, pensions, investment income, and other Canadian-source income.
- Review whether Form NR6 applications or related non-resident rental withholding requirements were applicable in prior years.
- Review overdue or amended returns relating to Canadian real estate transactions, including applicable Section 116 and T2062/T2062A filings where relevant.
- Review reporting obligations for foreign trusts, partnerships, corporations, investments, and other foreign assets.
- Calculate outstanding Canadian income tax, interest, and applicable penalties.
- Review whether foreign tax credits are available for U.S. or other foreign taxes paid in prior years.
- Consider the CRA Voluntary Disclosures Program (VDP) where the taxpayer has failed to comply with Canadian tax obligations and meets the program’s eligibility requirements.
- Determine whether the circumstances are appropriate for a VDP submission, amended returns, late-filed returns, or another CRA correction process.
- Review whether previously filed returns contain residency, income, foreign-property, rental, investment, or other reporting errors requiring adjustment.
- Reconcile T4s, T5s, U.S. W-2s, 1099s, brokerage statements, rental records, foreign tax returns, bank records, and other supporting documentation.
- Review potential late-filing penalties, gross negligence penalties, foreign reporting penalties, interest, and other CRA assessments.
- Apply the Canada–U.S. Tax Treaty, where relevant, to determine residency, taxing rights, and relief from double taxation for prior years.
- Prepare a year-by-year compliance review covering residency, income, assets, foreign accounts, corporations, trusts, investments, real estate, and previously filed returns before determining the appropriate disclosure or correction strategy.