How bad is this situation?

Question

I have been living and working in the U.S. for 4 years and have a corporation in Canada that my parents set up a long time ago... I haven't been paying my Canadian taxes because I haven't been in Canada for a long time and assumed I was a U.S. resident. I never applied for U.S. residency, but have always been in the U.S. for over 6 months. Having a corporation in Canada however, makes me think this point is moot.

I am about to sort out this mess, my income has been between 60,000 to 110,000 and I'm concerned about how much tax I'll have to pay and the late fees I might have accumulated over the past 4 years. Does anyone have an estimate of how much I'll have to pay indifferences? Or is there a way to get around this situation?

Answer 1

It's not that bad.

Answer 2

I think you're right about being a Canadian resident for tax purposes.

The important thing to remeber is that CRA's 'fairness' policy means if you turn yourself in, they will not prosecute.  You'll still have to pay the tax and interest and penalties due, but you won't go to jail.

You will have (presumably) foreign tax credits equal to the US taxes you paid.  That will partially mostly offset you taxes due, but there will be a remainder still owing.  Any amount owing will be hit with a 5% penalty, plus accried interest at CRA's prescribed rates (available online).  The interest and penalties will compound, so the sooner you deal with it, the better.

See an accountant, forthwith.  They MAY be able to negotiate a reduced penalty owing to it being an hoest mistake.    

Answer 3

A Canadian Corporation pays taxes in Canada.  You will have a substantial amount owing.  It is best to seek an accountants help in this.  You better find a good one.  Good Luck.