The U.S. income tax exclusion you can never use

The U.S. is one of two countries in the world who extract taxes from citizens who live and work abroad. No matter where you live, the U.S. wants its share. That's the cost of being a citizen. There is one tax law you may be able to take advantage of, however - the  Foreign Earned Income Exclusion. Sounds good right?

The IRS tells us that, "United States Citizens and resident aliens who live and work abroad may be able to exclude all or part of their foreign salary or wages from their income when filing their U.S. federal tax return. They may also qualify to exclude compensation for their personal services or certain foreign housing costs."

And there's only one catch: you can almost never leave your foreign home in order to qualify.

To qualify for the foreign earned income exclusion, you must have a "tax home" in a foreign country and income received for working in that country. You also have to meet one of two tests: the bona fide residence test or the physical presence test.

Bona fide residence can only be taken advantage of if you are a "citizen" of the country you live and work in. Permanent resident? No such luck.

The physical presence test is the kicker if you are a permanent resident, and one for those living and working in Canada that makes this an exclusion that is almost impossible to qualify for.

The U.S. tax law states that you have to be present in the foreign country for 330 days in the tax year. Now given that a great majority of Canadian towns and cities are within 100 miles of the U.S. border, it makes it pretty difficult to avoid the country for 35 days a year. And if you travel home to see family, or take a holiday anywhere outside of Canada - forget it - your 35 days are going to pass quickly. You don't qualify any more. Travel for business? Tough. 330 days or no dice.

So thank you U.S. for picking our pockets. Thank you for joining the African nation of Eritrea (a nation who's government has shuttered all privately owned print media, arrested and held without trial all critics of the government and who none other than the U.S. State Department has declared a "Country of Particular Concern" (CPC) for its record of religious persecution (Wikipedia)). Really - good partner in tax policy!

A season of opportunity

Things seem to quiet down a lot in winter time. And it's no different on the immigration front. I notice on the blog that inquiries drop, and things in general get quiet. But let me tell you, if you are thinking about immigration to Canada, winter is a fantastic time to take advantage of the quiet and get your application going. There is always a lot to do in preparation for an application, and you'll find response times to requests for documents from many government offices get handled a lot faster at this quiet time of the year.

An application requires police clearances, proofs of education, language proficiency tests - all these things are much easier to acquire and schedule when offices are quiet following the New Year holidays.

So use this time wisely and get your application rolling for 2014. Luck favours the prepared!

Tax issues for U.S. citizens living in Canada

If you are a U.S. citizen living in Canada, you still have a tax obligation to the U.S. government. One of only two countries that tax their citizens no matter where they actually live, the U.S. is more active than ever in making sure expatriates pay to support their government's ambitions. To keep this from ever becoming a "taxation without representation" issue, they still allow you to vote in your last state, county and city of residence prior to leaving the country. Isn't that nice?

For those living in the U.S., it must gall them that non-residents can vote to impact policies that they will not be subject to living with. For those living outside the U.S., I can tell you it's galling to pay to support governments and programs that I get absolutely no benefit from.

The primary exception here is that when the time comes, I will be eligible for Social Security. Granted, the amount I will receive doesn't nearly match the hit I take on a yearly basis from U.S. tax law, but there you go. Until Congress stops picking the pockets of expatriates, it's just the way it is. The only people the U.S. allows to shelter their income against taxes are those who own and run corporations - and politicians.

There's an old saying that applies here: "It must be nice to be a Roman." 

The Toronto Star - Canada urged to speed approval of skilled immigrants

Nicholas Keung, The Toronto Star's immigration reporter, filed this story related to the federal government's "Expression of Interest" program:

Ottawa’s new skilled immigrant selection system must process applicants within two months if Canada hopes to outbid other countries in attracting the world’s best and brightest, warns a new report by the Ontario Chamber of Commerce.

Immigration Minister Chris Alexander is set to launch the brand new “Expression of Interest” processing system (EOI) in early 2015 to replace the decades-old “first-in, first-out” mechanism for the federal skilled workers program.

Although Alexander says the system could shorten processing time down to six months, the report points out that comparable systems, such as Australia’s, take as little as 58 days to bring in skilled immigrants.

Read the rest of the story here

Would you like some salt with that?

Happy New Year from Toronto. We are in the midst of a real Canadian winter here, and the arctic air moving into the province today promises wind chill values of -36C by tonight. Yes - that's cold. With the snow we had last night, then the rain that followed it, there is a slushy mess all over the streets and sidewalks. That makes driving and walking treacherous.

The solution? Salt. Not the kind you'd want on your fries, or to enhance that steak you're having for dinner - we're talking anything from liquid calcium chloride, liquid magnesium chloride, liquid salt (salt brine), and rock salt. It's brutal stuff.

I've recommended on this blog that anyone thinking about their winter wardrobe add impermeable boots to the mix - rubber and latex-rubber boots that can take the wet and ice and especially the salt that you encounter everywhere this time of year. I see lots of Bay Street types in their Italian leather shoes heading to the office in this weather and all I think is, "well those are ruined." Because the salt is going to stain them, penetrate the leather, and nothing you can do will bring them back to life as they once knew it.

So the salt months are upon us. It's there for your safety. With a little preparation, you and your shoes will do just fine.