Canadian and US personal tax preparation laws are vary considerably. Income tax in Canada is based on residency regulations, whereas in the US income tax forms need to be completed based on citizenship rules.
If you are US citizen currently working and living in Canada, you need to be aware that you are still obligated to file a US income tax return.
In southern Ontario, you can get help with US personal tax preparation in Mississauga, Brampton and Oakville.
General Rules
US citizens need to report annually their worldwide income to the IRA, regardless of where they live. For instance, if you have obtained a permanent resident card in Canada and live here full-time with your family, you are required to file a personal US income tax return. The only escape clause you have is to renounce your US citizenship. For the vast majority, this is neither practical nor desirable.
Unfortunately for US citizens living in Canada, you need to file to income tax returns every year (a Canadian and a US one). The two countries have a tax treaty that governs foreign tax credits to help ensure you do not end up being double-taxed on the same income.
Additional Forms
Form 1040 is the principal form you have to file when completing your US tax return. In many cases there will be additional requirements such as Form 2555 and 1116. A few specific forms that need to be completed are detailed in this article, but this is not a comprehensive list. Each person’s circumstances need to be evaluated and a professional tax accountant can help you with your US personal tax preparation in Mississauga, Brampton and Oakville.
Foreign Bank Account Reporting (FBAR)
As a US citizen, you will most likely be asked to complete a FBAR form submitted to the Financial Crimes Enforcement Network (FinCen). The form essentially details your holdings in Canadian banks and other financial and investment accounts.
The form has to be completed and submitted online via the Bank Secrecy Act (BSA) E-filing system.
Failure to file this form, whether intentionally or not, can lead to severe financial penalties. You can end up being billed for the greater of $100,000 or 50% of your account holdings if you do not adequately report your Canadian bank and investment accounts.
Foreign Account Tax Compliance Act (FACTA)
FACTA was introduced in 2014 and requires financial institutions outside the US to report on accounts held by US citizens.
Under this legislation, US citizens are also required to complete Form 8938 (Statement of Specified Foreign Financial Assets). The US government uses the information supplied on this form to verify that US citizens are declaring all their income on the US tax return, including investment income.
This is an excellent example why it is so critical you get professional help for your personal tax situation as a US citizen living in Canada.
Other Rules
There are many other detailed US rules regarding the tax treatment of Canadian tax savings accounts, including RESP, RRSP, RRIF and TFSA. To learn about these rules and to ensure you are neither being double taxed nor being assessed penalties and interest (for failing to report financial information) speak to a Canadian Tax Accountant who specializes in Canada-US tax personal tax preparation.
American citizens currently residing in southern Ontario can get professional help with their US Personal Tax Preparation in Mississauga, Brampton and Oakville.
