La Quinta, CA
(760) 895-3516

Friday, April 17, 2015

Do Americans need to file a U.S. tax return while working in Canada?

Question: I am American by birth but have lived in Canada since age 8. Do Americans (United States Citizens) need to file a U.S. tax return while living in Canada?

Answer:  Yes, if you are a U.S. Citizen or greencard holder living in Canada, your world-wide income is subject to U.S. taxes. This is because the U.S. upholds U.S. Citizens and greencard holders to the same tax laws as residents of the United States.

Here's what you should do:

  • File a form 1040 just as a normal resident of United States would. The Due Date is different.
  • File FinCen 114 (FBARS) for your Canadian bank accounts if you have more than $10,000 USD Total funds (i.e. add your Canadian bank accounts together, if it's more than $10,000 after conversion rate, than file FinCen 114 for each account).
  • Use form 2555 and 1116 to your advantage. For form 2555 foreign income exclusion, you will want to limit your visits to the U.S. to less than 35 days per calendar year. 

If you've never filed before because you didn't know you had an obligation to, you should file the current tax year's 1040 as well as 1040's for the 3 previous years. As well you should file FBARS for any of the previous 6 years that you had an aggregate value of more than $10,000 USD in your Canadian and any other foreign (to the U.S.) bank accounts under the streamlined program for U.S. Citizens and greencard holders residing in the U.S. Penalties will apply  

Hope that helps, if you need assistance with filing U.S. income taxes while living in Canada, please contact us.

Borders Bookkeeping

(760) 895-3516