Time to settle up: IRS targets Americans living in Canada
Close to one million Americans living in Canada could be in trouble with the IRS, even though they’ve been keeping their taxes up top date on this side of the border.
But, starting in 2013, foreign financial institutions will have to hand over information to the IRS about any current and former U.S. citizens they have accounts with.
For many expats, the result could be filing years of U.S. tax returns, including potential penalties unless they take advantage of a limited amnesty which ends this summer.
The net result is that if you’re a U.S. citizen here in Canada, you must file two returns annually, advises HR Block: a Canadian return because you live here, and a U.S. return because you are a U.S. citizen. Fortunately, this does not necessarily mean you'll have to pay taxes to both countries.
You may be able to exclude up to $85,700 from income for U.S. tax purposes by completing Form 2555, which excludes foreign earned income, and attaching it to your U.S. return.
To claim this exclusion you must be a bona fide resident of Canada or must have been living in Canada for at least 330 days out of the last 12 months, the firm points out.
For more concrete tips on getting the IRS off your back, have a look at these suggestions from B.C. chartered accountant Warren Dueck.
As an American in Canada, have you been keeping up with tax filing? Or will you wait until someone comes knoocking?
By Gordon Powers, MSN Money
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