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canadian trader and IRS / US taxes
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canadian trader and IRS / US taxes

  #1 (permalink)
Trading Apprentice
Smiths Falls, Ontario, Canada
 
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canadian trader and IRS / US taxes

Hello,
I am in a process of opening an account with AMP. What an obligation does a canadian trader has to IRS / US taxes? What are the benefits and risks of trading with US broker versus canadian? My reason going with US broker is that canadian broker wanted me to have extra 10-20% of liquid cash on top of trading account amount.
Thank you.
Alf

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  #2 (permalink)
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  #3 (permalink)
Elite Member
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I just did my taxes as I normally would. I don't have to deal with the IRS.

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  #4 (permalink)
Market Wizard
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Alfralf View Post
Hello,
I am in a process of opening an account with AMP. What an obligation does a canadian trader has to IRS / US taxes? What are the benefits and risks of trading with US broker versus canadian? My reason going with US broker is that canadian broker wanted me to have extra 10-20% of liquid cash on top of trading account amount.
Thank you.
Alf

There is a form on the application called W8 (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) which you sign during the process. You need to just declare your taxes in country of residence.

Matt Z
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  #5 (permalink)
The fun is in the numbers
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The W8 Ben matt referred to, as he indicated, means you just file your Cdn taxes as per normal - meaning you would declare losses and profits worldwide so US account included.

As to risk, having suffered the USA MF Global taking funds from segregated accounts there are more protections for Canadian accounts provided.

In passing AMP cannot give you an account if you live in BC.

Good trading to everyone.
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  #6 (permalink)
Trading Apprentice
Smiths Falls, Ontario, Canada
 
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Thank you to all that replied with an answer.

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  #7 (permalink)
Elite Member
Toronto, Canada
 
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Alfralf View Post
What are the benefits and risks of trading with US broker versus canadian? My reason going with US broker is that Canadian broker wanted me to have extra 10-20% of liquid cash on top of trading account amount.

You don't worry about the IRS at all but when it comes to CRA if you trade more than a certain amount (and there is no real definition of what that is) then you need to file a T-2125 "Statement of Business or Professional Activities" with your return due to Subsection 248(1) of the Income Tax Act as it's considered an "Adventure or Concern in the Nature of Trade" (e.g. a business), see CRA bulletin IT-459 and Mittal v The Queen, 2012 TCC 417. It all comes down to which account you put your trading profits or losses to (Income vs. Capital Gains). This is actually an advantage as it is gets taxed at a lower rate if you have a high income and commissions and data feeds become business related costs that make for a deduction. I did have losses one year and was able to carry them forward and apply them to the next years profits also resulting in less tax paid. CRA is only interested in CAD numbers, so you need to know the adjusted costs basis for each and every trade. T-5008s are useless from most brokers (always wrong). If you only make 5 or 6 trades a year then it probably isn't an "Adventure or Concern in the Nature of Trade" but if you trade 1,000 futures contracts in a given year it definitely is.

There are many benefits of dealing with a US broker and Interactive Brokers now handles Canadian RRSP and TFSA accounts. Most Canadian brokers are way behind the times technologically and some still grab as much as 2.5% both ways converting your CAD to USD and then again when you convert it back. I have yet to find a Canadain broker that is as convenient and capable as IB.


Last edited by VexxisLLC; July 7th, 2016 at 07:24 AM.
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  #8 (permalink)
Trading Apprentice
Smiths Falls, Ontario, Canada
 
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Thank you VexxisLLC for a good post!

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  #9 (permalink)
Elite Member
Toronto , Ontario, Canada
 
Futures Experience: Beginner
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Posts: 185 since Jun 2016
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Hello,

so i have a question regarding taxes as well, since I'm also trading from canada.

do you still have to report taxes if you end up losing more than you invested (pretty much if u blew ur account and are no longer able to trade because you don't meed the margin set to trade 1 contract) ?

I believe you can report a loss if you made 50,000 but lost 30,000 from that 50,000 you profited.

but what about if you invested lets say 10,000, you made no profits, but instead you lost your initial investment, and went below the amount required to trade.
- also, lets say during the trading year, you take trades for which u've made some profits, but then over time u lost and gave back any profits, and went below the balance of your initial investment to the point you no longer meet margin requirements. Are the profits you made on those single trades taxable even though overall you have no profit?

thanks,

john


Last edited by noobforlyfe; September 30th, 2016 at 09:51 PM.
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  #10 (permalink)
Elite Member
Prince George BC Canada
 
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The short answer is no.

You can claim a capital loss and use it against future profits if and when you become profitable.

I trade with IB Canada. You get all the required CRA tax slips.

It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
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