IRS potential crackdown on foreign property owners

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Gold Ring
Gold Ring
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IRS potential crackdown on foreign property owners

Post by Peculiar_Investor » 06 Sep 2017 09:28

Across a number of topics there is discussion of how the IRS may or may not view foreign property owners and their tax situation. Jamie Golombek has a recent article in the Financial Post that sheds some light on the IRS' thinking, see What Canadians need to know about the IRS’ potential crackdown on foreign property owners
Jamie Golombek wrote:If you’re a Canadian who owns U.S. residential real estate, now may be a good time to ensure you are compliant with U.S. tax laws as the U.S. Internal Revenue Service may soon be cracking down on non-compliant foreign property owners as a result of a critical report issued last week by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA reports directly to the U.S. Treasury and is charged with providing independent oversight of IRS activities. Its report looked at property ownership by non-residents and concluded that “additional controls are needed to help ensure that non-resident alien individual property owners comply with tax laws.”

The report estimated that non-resident alien individuals’ investment in U.S. property increased from US$34.8 billion during the 12-month period ending March 2013 to US$43.5 billion during the 12-month period ending March 2016. The audit conducted by TIGTA was initiated to evaluate the IRS’s efforts in identifying and addressing non-resident alien individuals who should be paying tax on rental income of U.S. property.

If you are like many U.S. vacation property owners, chances are that you either rent or at least attempt to rent out your property when you are not occupying it. If so, the rental income that you earn may be taxed in both the U.S. and Canada.
We've taken the occasional glance at ownership of a US sunbelt property rather than renting/hoteling in the US and have always concluded that the US taxation aspects make it very unlikely we'd ever want to purchase a US sunbelt property and come under the scrutiny of the IRS.
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