Americans who live in Canada have more than one tax deadline to worry about: they must file both a Canadian and U.S. tax return. While there are an estimated 1 million Americans living in Canada, many of those people do not realize they need to file taxes in the US, how to do it or what happens if they don’t. A 2014 U.S. law (the Foreign Account Tax Compliance Act) is now requiring Canadian financial institutions to flag Americans with Canadians accounts so it is best to familiarize yourself with the rules.
WHO DOES THIS INCLUDE?
This rule applies to American citizens, dual American-Canadian citizens and US green card holders. If you have not formally renounced your US citizenship, you must report your income and assets to the Internal Revenue Service (IRS).
WHAT IF I DON’T COMPLY?
If you do not claim your income with the IRS, you face large fines and penalties. You may also be questioned at the border.
HOW DO I GET STARTED?
The streamlined process, a voluntary disclosure program, allows eligible Americans in Canada to meet their IRS tax obligations without any penalties. The requirements of the American tax system are quite complicated, largely because the system does not always align with the Canadian system. For example, the IRS may not view the Canadian tax-free savings accounts as truly tax-free.
DO OTHER CITIZENSHIPS REQUIRE TAX RETURNS?
The U.S. is largely the only country in the world that taxes their citizens even if they do not currently live on American soil.
If you are a dual citizen, it’s best to comply with these rules. And while it may end up costing hundreds of dollars to comply, the penalties for not complying can be much worse. Tackling one set of taxes can be confusing, two sets of taxes can be downright intimidating. Visit or contact Liu and Associates for a consultation and we can guide you through the nuances of the American tax system.