Do I Have to File US Taxes if I’m an American Living in Canada?

If you live in Canada, but retain American citizenship, you still have to file American taxes. This has always been the case, but last summer the IRS announced they’re clamping down on US citizens who don’t file while living abroad.

Last June, the IRS announced new procedures for non-resident U.S. taxpayers that went into effect on Sept. 1, 2012. According to the IRS:

“These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1, but have recently become aware of their filing obligations and now seek to come into compliance with the law.”

So if you live in Canada, and have for a few years, but you have never filed U.S. taxes you may have to submit at least three years retroactively, and separate filings of the U.S. Treasury’s recently instituted informational form .TD F 90-22.1.

The penalties for not filing now include:

• 5 percent of the amount of tax required to be shown on the return.
• An additional 5 percent penalty may be imposed for each month or fraction thereof during which the failure continues.
• The total failure to file penalty cannot exceed 25 percent.
• There is no penalty if no tax is due

If you live in Canada but retain your US citizenship, you may have many more tax questions like this. Feel free to contact our Toronto tax accountants at any time.