Tax Glossary

An employer-sponsored retirement savings plan allowing pre-tax or Roth contributions with potential employer matching.

An IRS requirement that your tax home and abode be in a foreign country to claim the Foreign Earned Income Exclusion.

Free distribution of cryptocurrency tokens to wallet holders, treated as ordinary income by the IRS when received.

A parallel tax system that ensures high-income taxpayers pay a minimum amount of tax by limiting certain deductions and exclusions.

IRS test requiring uninterrupted residence in a foreign country for an entire tax year to qualify for the Foreign Earned Income Exclusion.

Canada's mandatory contributory social insurance program providing retirement, disability, and survivor benefits.

The Canadian federal agency responsible for administering tax laws, collecting taxes, and delivering benefit programs.

Official proof that a worker is covered by one country's social security system and exempt from the other's under a Totalization Agreement.

The Child Tax Credit is a US tax benefit worth up to $2,000 per qualifying child — expats may claim it even for children living abroad under specific rules.

A foreign corporation with more than 50% ownership by US shareholders, subject to special tax rules requiring current income inclusion.

Accounting methods for determining the purchase price of cryptocurrency when calculating gains or losses on disposal.

A person who renounces US citizenship or long-term residency and meets certain net worth or tax liability thresholds, triggering the exit tax.

A state-licensed accounting professional who has passed the CPA exam and can provide tax, audit, and advisory services.

Tax rules applying to decentralized finance activities including lending, liquidity provision, yield farming, and token swaps.

An IRS procedure for filing late FBARs when you weren't aware of the requirement and have no unreported income.

Your permanent legal home—the place you intend to return to when absent—which determines your state of tax residency.

Double taxation occurs when two countries tax the same income — the US-Canada cross-border context makes this especially common because the US taxes citizens on worldwide income regardless of where they live.

A tax return filed for the year when a taxpayer's US residency status changed—part of the year as resident, part as nonresident.

A person who is both a resident alien and nonresident alien in the same tax year, typically during arrival or departure year.

Canadian federal program providing temporary income support to unemployed workers, funded by employee and employer premiums.

A federally-licensed tax practitioner authorized to represent taxpayers before the IRS.

Quarterly tax payments made by individuals who don't have sufficient tax withholding from wages.

A tax on unrealized gains imposed on covered expatriates who renounce US citizenship or long-term residency.

The act of renouncing US citizenship or abandoning long-term resident (green card) status, triggering special tax rules.

FATCA (enacted 2010) requires US taxpayers to report foreign financial assets above $50,000-$400,000 on Form 8938 and compels foreign banks worldwide to disclose US account holders to the IRS.

The FBAR (FinCEN Form 114) is a mandatory annual report for any US person with foreign financial accounts exceeding $10,000 in aggregate value — penalties for non-filing can reach $100,000 or more per violation.

Federal Insurance Contributions Act—the payroll tax funding Social Security (6.2%) and Medicare (1.45%) for employees and employers.

FIRPTA requires a 15% withholding on the gross sale price when a foreign person sells US real estate — Canadians selling US vacation properties, rental homes, or investment real estate are directly affected.

Allows qualifying US expats to exclude foreign earned income from US taxation — $126,500 (2024), $130,000 (2025), $132,900 (2026). See our complete FEIE Guide for details.

A foreign trust where a US person is treated as the owner for tax purposes, requiring the owner to report all trust income.

A deduction allowing self-employed US expats to deduct qualifying housing expenses that exceed the base housing amount.

The Foreign Housing Exclusion lets US expat employees exclude qualifying housing costs above a base amount from taxable income — for 2026, the base amount is $21,320 and the standard maximum is $39,975.

A US tax credit that reduces your US tax liability by the amount of foreign taxes paid on foreign-source income.

Unused Foreign Tax Credits that can be carried back 1 year or forward 10 years to offset US tax in other tax years.

A trust created or administered outside the US, subject to special reporting requirements for US persons involved.

The standard US individual income tax return form used by citizens and residents to report annual income.

IRS form and vouchers used to calculate and pay quarterly estimated taxes for income not subject to withholding.

US income tax return for nonresident aliens with income from US sources.

Simplified US tax return for taxpayers age 65 and older with larger print and a standard deduction chart.

Amended US individual income tax return used to correct errors on a previously filed Form 1040.

IRS forms used to report various types of non-employment income including freelance work, dividends, and interest.

IRS form used to calculate and claim the Foreign Tax Credit for foreign taxes paid or accrued.

IRS form used to claim the Foreign Earned Income Exclusion and/or the Foreign Housing Exclusion or Deduction.

Simplified version of Form 2555 for claiming the Foreign Earned Income Exclusion without the housing exclusion.

IRS form for reporting transactions with foreign trusts and receipt of large foreign gifts or inheritances.

Annual information return filed by foreign trusts with at least one US owner to report trust income and assets.

IRS form for US shareholders of Controlled Foreign Corporations to report financial information and income inclusions.

IRS form for reporting ownership of Passive Foreign Investment Companies (PFICs) and making certain elections.

IRS form used to disclose treaty-based return positions that override US tax law.

IRS form for US persons with interests in foreign partnerships to report financial information and income.

Form 8938 (Statement of Specified Foreign Financial Assets) is the FATCA filing for US taxpayers — thresholds range from $50,000 to $400,000 depending on filing status and residence, and it covers a broader range of assets than the FBAR.

Canadian form for reporting foreign property with a total cost over CAD $100,000, the Canadian equivalent of FBAR.

GILTI forces US shareholders of Controlled Foreign Corporations to include excess foreign earnings in US taxable income at an effective 10.5% rate for corporations — but individual shareholders face rates up to 37% without a Section 962 election.

A US tax residency test where anyone who holds a valid green card at any time during the year is considered a US tax resident.

A blockchain protocol change creating a new cryptocurrency, which may be a taxable event when you receive new coins.

The estimated tax an employee would pay if they remained in their home country, used as a baseline in tax equalization policies.

A tax-advantaged retirement savings account with traditional (tax-deductible) and Roth (tax-free growth) options.

An IRS examination of a tax return to verify that income, deductions, and credits are reported accurately.

An ITIN is a 9-digit IRS tax processing number for individuals ineligible for an SSN — critical for Canadian spouses filing jointly, foreign dependents, and nonresident aliens with US tax obligations.

An election allowing US shareholders to recognize annual gains and losses on marketable PFIC stock, avoiding the default PFIC tax regime.

A 3.8% surtax on investment income for individuals with modified AGI exceeding $200,000 ($250,000 married filing jointly).

Tax rules for creating, buying, selling, and trading Non-Fungible Tokens, which may be treated as collectibles by the IRS.

Canadian tax obligations for non-residents receiving income from Canadian sources, typically collected through withholding.

Canadian withholding tax on passive income paid to non-residents, generally at a 25% rate reducible by tax treaties.

A fixed place of business in a country that creates tax obligations for a foreign enterprise under tax treaty rules.

A Passive Foreign Investment Company (PFIC) is a foreign corporation that triggers punitive US taxation — virtually all Canadian mutual funds and ETFs qualify, creating a tax nightmare for US citizens in Canada.

The Physical Presence Test requires 330 full days in a foreign country during any 12-month period to qualify for the FEIE — a single miscounted day can disqualify your entire exclusion.

Form 2848 authorization allowing a tax professional to represent you before the IRS and access your tax information.

An election allowing US shareholders of PFICs to be taxed currently on their share of the PFIC's earnings, avoiding punitive default rules.

A retirement account funded with after-tax dollars where qualified withdrawals of contributions and earnings are tax-free.

The RRSP is Canada's primary retirement savings vehicle — US citizens in Canada can defer US tax on RRSP income under the tax treaty, but must still report the account on FBAR and FATCA filings.

A provision that protects taxpayers from penalties if they meet specific predetermined criteria, common in state residency and estimated tax rules.

IRS schedule for claiming itemized deductions including mortgage interest, state taxes, medical expenses, and charitable contributions.

IRS form for reporting profit or loss from a sole proprietorship or single-member LLC business.

IRS form used to calculate self-employment tax (Social Security and Medicare) on net self-employment income.

The Qualified Business Income (QBI) deduction allows self-employed expats and pass-through business owners to deduct up to 20% of qualified business income from US taxes.

Self-employment tax is the combined 15.3% Social Security and Medicare tax that self-employed individuals pay on net earnings — and the FEIE does not reduce it, catching many US expats off guard.

The 15.3% Social Security and Medicare tax that self-employed US citizens owe even when living and working outside the United States.

Rules governing US Social Security benefits and taxes for Americans working or retiring abroad.

Income attributed to a specific state or country based on where the work was performed or where the income-producing asset is located.

Cryptocurrency earned by validating blockchain transactions through proof-of-stake, taxed as ordinary income when received.

The minimum connection between a taxpayer and a state that allows the state to impose tax obligations.

A state tax concept where spending a certain number of days in a state (often 183+) and maintaining a home there makes you a tax resident.

IRS program allowing eligible taxpayers to catch up on delinquent tax returns and FBAR filings without penalties.

Certain categories of CFC income that US shareholders must include in their taxable income currently, regardless of whether it's distributed.

The Substantial Presence Test uses a weighted 3-year day-count formula to determine if a foreign national is a US tax resident — Canadian snowbirds are at highest risk of accidentally triggering it.

The standard Canadian personal income tax return filed annually by individuals with the Canada Revenue Agency.

Canadian employer-issued slip reporting employment income and deductions, similar to the US W-2.

Canadian tax slip reporting investment income including interest, dividends, and royalties.

An employer policy ensuring employees on international assignments pay the same taxes as if they had stayed in their home country.

Additional compensation provided to cover the tax liability created when an employer pays taxes on behalf of an employee.

The general area of your main place of business or work, regardless of where you maintain your family home.

Your regular or principal place of business or employment — the location the IRS uses to determine whether you qualify for expat tax benefits like the FEIE.

Any individual who prepares tax returns for compensation, ranging from licensed professionals to seasonal preparers.

An official document from a country's tax authority certifying an individual's tax residency status, used to claim treaty benefits.

Agreement between countries to prevent double taxation and define tax treatment of cross-border income.

The TFSA is tax-free in Canada but fully taxable in the US — for US citizens in Canada, it is arguably the single worst investment vehicle due to PFIC traps, full US taxation of income, and potential foreign trust reporting.

Bilateral agreement between countries to coordinate Social Security coverage and prevent double taxation of social security.

Rules governing prices charged between related entities across borders, ensuring they reflect arm's-length market values.

Tax treaty provisions that determine residence for individuals who would otherwise be tax residents of both countries.

The US-Canada Tax Treaty is the cornerstone agreement governing cross-border taxation between the two countries — it reduces withholding rates, allocates taxing rights, and provides critical rules for pensions, Social Security, and RRSP deferral.

Digital representations of value treated as property by the IRS, including Bitcoin, Ethereum, and other cryptocurrencies.

An IRS process for taxpayers with willful non-compliance to come forward and resolve tax issues, potentially avoiding criminal prosecution.

IRS form employers use to report wages paid and taxes withheld from employees.

Amounts deducted from wages or payments by a payer and sent to the IRS as prepayment toward the recipient's tax liability.