U.S. citizens living in Canada: Time to come clean to the IRS - Financial Post

[dakonej]

This may be of interest to dual-citizenship (US/Canada) forum members. The IRS is giving US citizens anywhere in the world until Aug. 31 to report their taxes or face penalties.

http://www.financialpost.com/personal-finance/citizens+living+Canada+Time+come+clean/5178975/story.html

 

[scylla]

I pointed this article out to my husband this weekend. (Fortunately he's not an offender. He's been living outside of the US for years, is very familiar with the IRS laws and always files his taxes religiously.)

I'm sure there are some who haven't filed and know they should be filing. But this article makes me wonder what percentage of those affected have absolutely no clue and assumed they didn't have to file US taxes while living in Canada. I guess some people are in for a rude awakening...

 

[dakonej]

The article says "1 million U.S. citizens living in Canada..."

I don't know if that figure represents the actual number of people affected or just the total US citizens in Canada. 1 Million sounds like a big number to me.

Anyways, I'm glad your husband is up-to-date with his taxes.

 

[Love_Young]

That is why you should file the return anyway. I actually wish the IRS would implement a similar system to the CRA's because I find it would work a bit better. This year was my first time filing a tax return. I never was required to before and didn't need to this time either but I just did to rest my mind. It is comforting knowing that I can show them, "okay I don't owe you any money" you know. I really hope that some people do get in trouble for it like one person whom I know, who is still waiting on their approval from CIC was here illegally for 10 years, was caught, then given a TRP. Anyway, he has no desire to file a tax return after getting approved and hasn't file tax returns for years. Honestly, this is uncalled for. I really hope that he gets woken up before it is too late. I actually find it somewhat hilarious how most of the comments were talking about renouncing their American citizenship but what they don't realize is that they would still be punished (if they did something wrong) at least up until the point of losing citizenship. Renouncing your citizenship doesn't just magically get rid of your previous duties as a US citizen. :

 

[aerogurl87]

If someone is working or living in the US at any time of the year, I think this is good. But if you're living and working solely in another country then this is outrageous. The US is just doing this to pay for their irresponsibe spending habits. And why I have to tell them about my bank account with more thsn 10k in it, a bank account that has nothing but money earned in Canada mind you, is beyond me.

 

[Stumpedmom]

ok...stupid question...does this mean that the US citizens are double taxed on that income...they earn the income here in Canada, pay all the taxes here, and then have to report it to the IRS every year and possibly get taxed AGAIN??? That really does not make any sense...and then asking about bank accous, RESPs and RRSP's.....that's just plain wrong...that means that because American law does not recognize these as non taxable or tax breaks....you have to pay taxes on the interest or the full amount??


This law is outrageous for people not living there or contributing to the economy of the US...

 

[Love_Young]

If someone is working or living in the US at any time of the year, I think this is good. But if you're living and working solely in another country then this is outrageous. The US is just doing this to pay for their irresponsibe spending habits. And why I have to tell them about my bank account with more thsn 10k in it, a bank account that has nothing but money earned in Canada mind you, is beyond me.

I agree. I do not like that I should have to let them know if my "Canadian" funds is over $10,000, that I earned in "Canada", and have in my "Canadian" account. What does this do for the US? Shouldn't filing a tax return for both countries be enough. I also, still hate that they want to continue to point blame at its citizens and to try to get them to solve it. I mean that is like charging your own credit card to the max and tell your friend to pay it. Yeah right!

 

[dakonej]

ok...stupid question...does this mean that the US citizens are double taxed on that income...

This law is outrageous for people not living there or contributing to the economy of the US...

Apparently you don't get double taxed. See this other article: http://business.financialpost.com/2011/07/05/americans-in-canada-must-file-u-s-tax-returns/

"The Canada-U.S. tax treaty prevents double taxation. Tax that you pay on your U.S. income tax return can be claimed as a foreign tax credit to offset tax on the Canadian tax return —and vice versa."

Of course, if I were you, I'd check with a consultant or the IRS itself to make sure.

 

[Love_Young]

ok...stupid question...does this mean that the US citizens are double taxed on that income...they earn the income here in Canada, pay all the taxes here, and then have to report it to the IRS every year and possibly get taxed AGAIN??? That really does not make any sense...and then asking about bank accous, RESPs and RRSP's.....that's just plain wrong...that means that because American law does not recognize these as non taxable or tax breaks....you have to pay taxes on the interest or the full amount??


This law is outrageous for people not living there or contributing to the economy of the US...

No, they cannot double tax because they hold a tax treaty with Canada. If you are filing "married filing separately" I believe you are allowed an exemption of up to $96,000 (or something close to that) of tax free worldwide income. Of course if you file that way you do miss out on some benefits though than if you were filing jointly.

 

[scylla]

ok...stupid question...does this mean that the US citizens are double taxed on that income...they earn the income here in Canada, pay all the taxes here, and then have to report it to the IRS every year and possibly get taxed AGAIN??? That really does not make any sense...and then asking about bank accous, RESPs and RRSP's.....that's just plain wrong...that means that because American law does not recognize these as non taxable or tax breaks....you have to pay taxes on the interest or the full amount??


This law is outrageous for people not living there or contributing to the economy of the US...

No - there's no double taxation or taxation of TFSAs/RSPs/RESPs. That's one of the common misunderstandings and may be a reason why some people avoid filing US taxes while living abroad.

 

[Love_Young]

No - there's no double taxation or taxation of TFSAs/RSPs/RESPs. That's one of the common misunderstandings and may be a reason why some people avoid filing US taxes while living abroad.

I would agree. Maybe this is why people avoid it. I wish there was a bit help for those of us that are from two countries.

 

[scylla]

I would agree. Maybe this is why people avoid it. I wish there was a bit help for those of us that are from two countries.

I couldn't agree more. My husband and I have had a nightmare of a time trying to figure out what to file where (my husband and I own accounts and property in the US as well which makes the situation more complicated). It's difficult to find an accountant who has a thorough understanding of the taxes on both sides of the border. We actually had one tell us that no one has a complete understanding because some of the laws are subject to interpretation. Great!

 

[CharlieD10]

Hmmm...I'm thinking I should be tax certified for both Canada and the US when I move!

 

[Love_Young]

I couldn't agree more. My husband and I have had a nightmare of a time trying to figure out what to file where (my husband and I own accounts and property in the US as well which makes the situation more complicated). It's difficult to find an accountant who has a thorough understanding of the taxes on both sides of the border. We actually had one tell us that no one has a complete understanding because some of the laws are subject to interpretation. Great!

Oh this sounds just great for us as well. : One day I will most likely not only inherit my moms house but my grandmas as well. I could just easily sell them but I have an attachment to them. So I will rent one and keep one as a summer home. I worry so much what I will run into though to accomplish this especially tax wise. I know it is a long shot but I hope that this type of stuff will be easier to deal with once I get to that point but I don't have much hope for it. We really need more help especially with how closely related the US and Canada are but hmm...what can we do?

Hmmm...I'm thinking I should be tax certified for both Canada and the US when I move!

Yes, please do. And have some come out to Newfoundland to us to while you are at it will ya?
We haven't got a soul that can help me. Lol. Must be the lack of immigrants here.

 

[YorkFactory]

And why I have to tell them about my bank account with more thsn 10k in it, a bank account that has nothing but money earned in Canada mind you, is beyond me.

The reporting requirement is actually worse than that. If the total value of all your foreign accounts exceeds $10,000 at any point during a calendar year, you must provide details of all of your accounts, even if the individual accounts are worth less than $10,000. I think it would be reasonable if the limit were $100,000 (which is the threshold for a similar reporting requirement for Canadians).