Toronto, Canada, January 11, 2016 – Paul Babber & Associates (www. pbaltd.ca), a premier accounting and tax consultation firm in the Greater Toronto Area (GTA), is warning Canadians to be cautious about one part of their Tax-Free Savings Accounts (TFSA) that is not entirely tax-free. The costs arise when Canadian investors attempt to diversify their TFSA by incorporating dividend stocks from the United States. (Source: Jackson, D., “The TFSA isn’t always tax free,” Business News Network, December 21, 2015; http://www.bnn.ca/News/2015/12/21/The-TFSA-isnt-always-tax-free.aspx.) —
"The IRS [Internal Revenue Service] takes 30% of any U.S dividends," explains Paul Babber, the CEO and president of Paul Babber & Associates. "This happens regardless of whether the investor is an American citizen or resident."
Due to a tax treaty between Canada and the United States, it is possible to cut this 30% tax in half. Doing so, however, requires extra steps on the part of the Canadian investor. The necessary form—a W-8BEN—can be found on the IRS web site and needs to be filled out and submitted ahead of regular tax deadlines.
"As with anything involving taxes—especially foreign taxes—dotting the i’s and crossing the t’s is very important,” notes Babber “Having the guidance of a broker, financial advisor, or tax attorney to process the form is always beneficial."
Options exist outside of a registered account for owning a U.S. dividend stock without the hefty tax attached, but these are more complicated and are not easily obtained unless one either has personal expertise or the help of an expert.
As Babber observers, "Since the start of 2016 saw a decrease in the TFSA contribution limit, there is an increasing desire among Canadians to find ways to make their money do more. It is important, therefore, that they are able to stay on top of the extra catches that can arise when dealing with investing abroad."
Paul Babber and Associates Ltd. has been providing personal and corporate tax assistance to Richmond Hill and GTA residents for over 30 years. More information about their work in accounting, bookkeeping, tax planning, and income tax management can be found on their web site at www.pbaltd.ca.
Name: Paul Babber
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Organization: Paul Babber And Associates Limited
Address: Park Place Corporate Center,15 Wertheim Court,Suite # 611,Richmond Hill, Ontario,L4B 3H7
Release ID: 100894