Whether you are a U.S. citizen living in Canada, a Canadian spending time in the U.S., or a Canadian with property in the United States, it’s important you know your responsibilities when it comes to filing your taxes.
Crowe MacKay LLP’s tax advisors highlight how each group with ties to the U.S. may be impacted by either country’s tax obligation, helping you save time and avoid penalties.
Tax filing obligations of U.S. citizens living in Canada
If you are a U.S. citizen living in Canada, you still have U.S. tax filing obligations. If you are delinquent in your U.S. filings, the IRS does have a streamlined process in place to allow you to get caught up without penalties. However, it is unclear how much longer the IRS will keep this process open, so if you have been holding off, now is the time to get caught up.
Being a U.S. citizen can also present problems if you hold investments in Canada such as RESPs, RDSPs, TFSAs, and mutual funds or if you are the shareholder of a Canadian corporation. These topics are beyond the scope of this article so it is important to contact your trusted Crowe MacKay advisor for assistance.
I don't have any U.S. income, so why do I still need to file a U.S. tax return?
U.S. citizens continue to be taxed on their worldwide income despite no longer living in the United States. However, as a U.S. citizen living in Canada with no U.S. income, it is very unlikely that you will owe U.S. taxes in which case there would be no penalties for not filing a U.S. tax return. However, the IRS has many additional information return filing requirements that carry extremely hefty penalties, most starting at a minimum of $10,000USD. This is where not keeping up with your U.S. tax filings can quickly become a nightmare.
Additionally, filing your U.S. tax returns will make sure you receive any U.S. benefits you are entitled to such as the economic stimulus payments and child tax credits. When you visit the United States, you may also be questioned as to whether you are current in your U.S. tax filings when you show a Canadian passport with a U.S. birthplace.
If you live in Canada and are or ever have been a U.S. citizen, we suggest you contact your Crowe MacKay tax advisor to determine your tax filing requirements.