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.
Americans have long been required to file an annual tax return based on their worldwide income, regardless where they actually earned their money. That’s nothing new.
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
* Follow Gordon on Twitter here.
Posted by: mexicanrose | Jun 21, 2021 9:44:02 AM
How ridiculous. If they are legally in Canada..make their home here, work here, I fail to see why the income is any of the IRS's business. I swear the continent of N. America is becoming more and more Communist every day!!
Posted by: Ray | Jun 21, 2021 2:56:22 PM
Why would Canadian banks hand over ANY info to the IRS without a court order? That's what doesn't make sense!
Posted by: Havoc_4 | Jun 21, 2021 6:32:44 PM
the IRS has no say in Canada its a bluff to scare idiots into doing the returns... they tryed this with the casinos in canada and the canadian casino's told the IRS to take a hike and the banks will do the same. Good luck IRS why dont you smoke anouther
Posted by: Jan | Jun 21, 2021 7:02:12 PM
This is because you are still legally a US Citizen so you have to file a tax return in the States
Just like here- Canadians working in the states file both Cdn and US tax returns
You won't owe more money- Tax brackets in the US are lower than Canada anyways
Posted by: astrid | Jun 21, 2021 7:09:19 PM
Your indignation doesn't alter the fact there are tax treaties between the US and Canada and you'd better believe they can force banks to give them the info they want. Don't forget most banks have holdings in the US. If you are a US citizen you are required to file an income tax return each year no matter where in the world you live. Taxes are higher in Canada so for most people there is no tax owing to the US. But you still must file. You can stick your head in the sand if you want but it sounds like they are getting serious now. The IRS is ruthless and they even want to know what's in your RRSP. Don't mess with these people.
Posted by: RJM | Jun 21, 2021 8:44:42 PM
For Canadians working in the US...you don't have to file a Canadian Tax return unless you earned income in Canada. I am here in the US on a Green Card as a Canadian citizen and don't file Canadian Income taxes as my only earned income is in the US.
Posted by: MikeH | Jun 21, 2021 9:59:30 PM
Not quite true. You must completely sever your residency in Canada when you leave and cut all ties. CRA will tax you on your worldwide income unless you can demonstrate that you have made a clean break from Canada with no forseeable return. Be careful !
Posted by: Chip | Jun 21, 2021 11:00:12 PM
Without a Court Order... Canadian banks CANNOT disclose personal information to the IRS. If they do... they are in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA), which is overseen by the Privacy Commissioner of Canada. Organizations or institutions such as banks MUST obtain an individual's consent when they collect, use or disclose the individual's personal information... which would include that individual's income and bank assets.
Posted by: j. deceuninck | Jun 22, 2021 12:50:38 AM
I don't know how this one is going to work out for me. I am born in the USA by accident -my parents came to the US for a visit during the thirties, left something like three weeks later. I never went back to the US .But when I came to Canada as an immigrant in 1954, I was told by the American authorities that even though I was born in the US I had lost my US citizenship for having served as a volunteer in a foreign army. But recently I went to the US Consulate to ask for a piece of paper confirming this loss of citizenship. Well now they tell me that the laws were changed since (no reason given for the change) and that I now am again a US citizen whether I like it or not, and that therefore I have to file tax returns with the IRS going back some 20 odd years. As far as I am concerned this whole thing does not make sense unless of course you look at it from the tax angle : collect as much money from as many people as possible by way of taxes , by whatever means.... I also think that this US Canada tax treaty is a sham and should be rescinded because there is no logic behind it,only greed on the part of the US and fear on the part of Canda of reprisals on the part of the US if they don't agree on this and other matters. I know that US citizens or those whom the US considers rightly or wrongly as their citizens - people such as myself e.g. ,have to file returns with this IRS.But No country in the world operates ithis way . Except Lybia. Well I hope we all know what that country is about. Which leads me to the following question : why does the US have to be in the same league as Lybia ? And why does nobody have any qualms about this ?
Posted by: Confused | Jun 24, 2021 5:31:29 PM
@J. deceuninck: I feel for you! You should speak to a lawyer.
I am a U.S. citizen, but would like to move to Canada. This law is absurd and I sincerely hope that Canada does not comply. Politicians in my country have gone mad, which is why I'd like to move.
Posted by: Don D. Nelson, Attorney, CPA. | Jun 29, 2021 10:34:03 AM
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Posted by: Dean wissler | Jul 3, 2021 9:39:36 PM
This just sounds like more crap that we have to put up with by our evil greedy government.
Canada better have the balls to keep there banking information to themselves and not bow down to the american gaovernment demands. Maybe the american banks shoudl release all there info to the Canadians first...
Posted by: joe smith | Aug 7, 2021 5:57:41 PM
MOVE YOUR MONEY TO A CREDIT UNION.
Posted by: nyc accountant | Aug 25, 2021 2:55:27 PM
Taxes are higher fast and most people is no tax. The IRS is ruthless, and they even want to know what's in your RRSP. Do not mess with these people.
Posted by: s | Sep 27, 2021 4:57:22 PM
Move your money to YOUR MATTRESS!
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