# File an income tax return for foreign business?



## Madonna (Nov 24, 2011)

I've asked some of this before, but need more info. My son is a dual citizen of the U.S. and Canada. He mostly grew up in Canada (6 years old when we immigrated). We did not know of our filing obligations to the U.S. until late 2011. Here’s the question: he is an auto mechanic who worked for years in a dealership, then, about 5 years ago, went out on his own, opening a shop in his home garage. He is the only person in his business, which he incorporated in Canada last year. I believe it was a sole proprietorship before that. He only repairs vehicles in his home shop – no U.S. source income, nor connection to the U.S. except his citizenship. Does the business have to file any sort of paperwork with the IRS? Or can he just file forms 1040, 2555, and/or 1116, etc. for himself only? He files his Canadian tax returns for the business as well as for himself. His now incorporated business pays him a salary and pays his Canadian social security tax.

Also, because he incorporated the business, is it considered a corporation by the IRS (and the attendant nightmarish forms he would have to file) even though he’s just a guy in his garage repairing vehicles? What forms would he have to file for the business if he is required to do so? And would he have to file his own personal forms as well, in addition to the business forms?

Thank you in advance for any info on this.


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## Bevdeforges (Nov 16, 2007)

Since incorporation, he only needs to report his salary like any other wage slave. Before, though, it depends on the form of business and his gross take. Most likely, as a sole proprietorship it would be a Schedule C to report the revenues and expenses of the business as part of his worldwide income. 

As far as the business is concerned, it's not subject to US taxes directly, so the good news is that he shouldn't have to file any US corporate returns. Depending on the details of the corporation, it may or may not fall under the FATCA reporting rules (form 8938) - normally this covers financial assets held for investment purposes (i.e. not a single owner business like this) and in any event, the threshold for declaring this form from overseas is now $200,000 anyhow. Check the instructions for form 8938 if there are any questions.
Cheers,
Bev


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## Madonna (Nov 24, 2011)

Bevdeforges said:


> Since incorporation, he only needs to report his salary like any other wage slave. Before, though, it depends on the form of business and his gross take. Most likely, as a sole proprietorship it would be a Schedule C to report the revenues and expenses of the business as part of his worldwide income.
> 
> As far as the business is concerned, it's not subject to US taxes directly, so the good news is that he shouldn't have to file any US corporate returns. Depending on the details of the corporation, it may or may not fall under the FATCA reporting rules (form 8938) - normally this covers financial assets held for investment purposes (i.e. not a single owner business like this) and in any event, the threshold for declaring this form from overseas is now $200,000 anyhow. Check the instructions for form 8938 if there are any questions.
> Cheers,
> Bev


Thank you, Bev. What a relief! He's going crazy enough as it is trying to do his Canadian year end and he has an accountant for that! I will check out the form 8938 to see if he needs to file that (I don't think he does). Thank you!!


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