AMERICANS IN CANADA - You MUST file U.S. taxes.

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    Sep 22, 2011 9:59 PM GMT
    Ignorance no longer an excuse: Americans in Canada must file taxes to Uncle Sam



    Published on September 22, 2011

    Topics : IRS , Aylett Grant Tax , Transition Financial Advisors , U.S. , Canada ,

    TORONTO


    TORONTO - Dave, a bewildered American living in Canada, turns to an anonymous forum to ask whether — even though he has "nothing more to do with the USA other than my citizenship" — he should be filing taxes to Uncle Sam.

    The answer is yes. But it's a question most of the one million or so Americans living in Canada appear to have ignored until now.

    There are a number of people who fall into this category: green card holders unaware they are considered citizens; those who came as very young children and some who believe since their Canadian taxes offset their U.S. taxes, they are not required to file.

    But times have changed and U.S. President Barack Obama has made it clear combating tax evasion is one of his priorities as the indebted country seeks ways to shore up revenue.

    "The days of not being informed or not caring about what your tax filings obligations are over," says Peter Aylett, managing partner with Aylett Grant Tax LLP.

    "The penalties are just so severe that individual taxpayers need to pay attention to what needs to be filed."

    The issue has come to light in recent weeks following the lapse of a Sept. 9 deadline for amnesty under the Offshore Voluntary Disclosure program.

    Aylett says he has since received an influx of calls from Americans living in Canada asking for his advice.

    "The IRS doesn't fully quite appreciate our culture here in Canada, where people are really compliant. They want to follow the rules. They just want to know how and they're frustrated."

    Dual citizens now face a dilemma: be honest and risk getting slapped with as much as a 50 per cent penalty for failing to disclose their bank accounts, or knowingly evade the system.

    The U.S. is one of only a handful of countries that requires citizens to file their worldwide income in the U.S. regardless of where they live.The rule applies to U.S. citizens living in any other country. Among some seven million Americans living abroad, only about 4.6 per cent have been filing returns in the U.S., says Terry Ritchie, an adviser on cross-border tax issues at Transition Financial Advisors Inc.

    "Most Americans, particularly those dual citizens in Canada, they're ignorant of these rules because they believe that once they move to Canada and because they don't earn anything in the U.S. or have any assets in the U.S. that they have no longer a U.S. tax filing requirement," he said.

    "But that's not true
    ."

    Americans in Canada have only one option: coming forward. Giving up their U.S. citizenship leads to complications at border crossings and doesn't wipe out the penalties.

    Under U.S. expatriation rules, any American renouncing their citizenship is forced to file their taxes for the past five years.

    Either way, U.S. citizens will be required to fill out forms to declare the value of their Canadian assets, some of which are subject to capital gains taxes.
    "It's a hoop that people really have to think about jumping through," Ritchie said.

    Ignoring the rules isn't an option either. Beginning in 2014, the Foreign Account Tax Compliance Act will compel Canadian financial institutions to report accounts held by U.S. citizens to the IRS.

    "It would be a lot more embarrassing and you'd have a lot better chance of getting penalties abated if you got to them before they got to you," Ritchie said.

    But Americans who were honestly unaware of the rules stand a chance of being granted leniency — as long as they make a written plea of their ignorance.

    There is a risk the IRS could assess penalties, but it is remote.

    "In my professional experience, they have been lenient. I've never seen a situation where they have imposed a penalty for people who willingly come forward," Ritchie said.

    Aylett said he expects an increase in the number of audits the IRS conducts, but added if a non-compliant taxpayer completely and truthfully complies with the rules, the agency tends to not apply additional penalties or seek criminal prosecution.

    Although there is no specific guidance from the IRS following the end of the disclosure program, Aylett said he recommends filing tax and information returns from each year from 2003 to 2010.

    Regular filing in the U.S. does not usually result in paying more taxes. The foreign-earned income credit exempts up to US$92,900 of Canadian income. Because taxes are higher in Canada, the foreign tax credit also applies. The process is time-consuming, but necessary.

    While filing now carries a risk, Aylett said, the alternative is far worse.

    "The worst thing that can happen to a person that continues to be non-compliant is that the IRS discovers them and throws the book at them by assessing greater penalties than those that were available under the (Offshore Voluntary Disclosure) program."
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    Sep 23, 2011 12:17 AM GMT
    Thank you very much man. All useful information.
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    Sep 23, 2011 12:20 AM GMT
    Thats for all expats.. my dad lives in Amsterdam, is married to a Dutch woman (did not get European citizenship) and still has to do the same
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    Sep 23, 2011 12:22 AM GMT
    Sounds like a very labour intensive operation for very average revenue. Not to mention the inappropriateness of the move towards Canada.

    Who said taxing billionaires again?
  • barriehomeboy

    Posts: 2475

    Sep 23, 2011 12:24 AM GMT
    Tons of wealthy Americans (you USA guys) are moving to Canada to escape taxes down there. Yay if they are gay! I'm a Realtor and I sell them houses so it's important for me to know if this is a real issue, or not.
  • barriehomeboy

    Posts: 2475

    Sep 23, 2011 12:25 AM GMT
    It's coming back to me. You have to renounce your USA citizenship.
  • wild_sky360

    Posts: 1492

    Sep 23, 2011 12:27 AM GMT
    Not suggesting anything....but if one were to hold out until the impending bankruptcy of the US, certain details may get lost in the confusion of restructuring...just sayin.
  • wild_sky360

    Posts: 1492

    Sep 23, 2011 12:30 AM GMT
    barriehomeboy saidTons of wealthy Americans (you USA guys) are moving to Canada to escape taxes down there. Yay if they are gay! I'm a Realtor and I sell them houses so it's important for me to know if this is a real issue, or not.


    My ex's father could only spend so many days per year at his Vancouver home without paying income taxes to both governments. Part time NY city residents face a similar dilemma and carefully document their time spent there.
  • barriehomeboy

    Posts: 2475

    Sep 23, 2011 1:19 AM GMT
    Yeah I'm only a Realtor, not accountant which the last poster might have been when he politely inplied that anyone with money should get their funds and their asses out of the USA. Cash in the stocks. Sell all the assets. This one is going to be worse than the 1930's.
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    Sep 23, 2011 1:52 AM GMT
    Upper_Cdn saidIgnorance no longer an excuse: Americans in Canada must file taxes to Uncle Sam



    Published on September 22, 2011

    Topics : IRS , Aylett Grant Tax , Transition Financial Advisors , U.S. , Canada ,

    TORONTO


    TORONTO - Dave, a bewildered American living in Canada, turns to an anonymous forum to ask whether — even though he has "nothing more to do with the USA other than my citizenship" — he should be filing taxes to Uncle Sam.

    The answer is yes. But it's a question most of the one million or so Americans living in Canada appear to have ignored until now.

    There are a number of people who fall into this category: green card holders unaware they are considered citizens; those who came as very young children and some who believe since their Canadian taxes offset their U.S. taxes, they are not required to file.

    But times have changed and U.S. President Barack Obama has made it clear combating tax evasion is one of his priorities as the indebted country seeks ways to shore up revenue.

    "The days of not being informed or not caring about what your tax filings obligations are over," says Peter Aylett, managing partner with Aylett Grant Tax LLP.

    "The penalties are just so severe that individual taxpayers need to pay attention to what needs to be filed."

    The issue has come to light in recent weeks following the lapse of a Sept. 9 deadline for amnesty under the Offshore Voluntary Disclosure program.

    Aylett says he has since received an influx of calls from Americans living in Canada asking for his advice.

    "The IRS doesn't fully quite appreciate our culture here in Canada, where people are really compliant. They want to follow the rules. They just want to know how and they're frustrated."

    Dual citizens now face a dilemma: be honest and risk getting slapped with as much as a 50 per cent penalty for failing to disclose their bank accounts, or knowingly evade the system.

    The U.S. is one of only a handful of countries that requires citizens to file their worldwide income in the U.S. regardless of where they live.The rule applies to U.S. citizens living in any other country. Among some seven million Americans living abroad, only about 4.6 per cent have been filing returns in the U.S., says Terry Ritchie, an adviser on cross-border tax issues at Transition Financial Advisors Inc.

    "Most Americans, particularly those dual citizens in Canada, they're ignorant of these rules because they believe that once they move to Canada and because they don't earn anything in the U.S. or have any assets in the U.S. that they have no longer a U.S. tax filing requirement," he said.

    "But that's not true
    ."

    Americans in Canada have only one option: coming forward. Giving up their U.S. citizenship leads to complications at border crossings and doesn't wipe out the penalties.

    Under U.S. expatriation rules, any American renouncing their citizenship is forced to file their taxes for the past five years.

    Either way, U.S. citizens will be required to fill out forms to declare the value of their Canadian assets, some of which are subject to capital gains taxes.
    "It's a hoop that people really have to think about jumping through," Ritchie said.

    Ignoring the rules isn't an option either. Beginning in 2014, the Foreign Account Tax Compliance Act will compel Canadian financial institutions to report accounts held by U.S. citizens to the IRS.

    "It would be a lot more embarrassing and you'd have a lot better chance of getting penalties abated if you got to them before they got to you," Ritchie said.

    But Americans who were honestly unaware of the rules stand a chance of being granted leniency — as long as they make a written plea of their ignorance.

    There is a risk the IRS could assess penalties, but it is remote.

    "In my professional experience, they have been lenient. I've never seen a situation where they have imposed a penalty for people who willingly come forward," Ritchie said.

    Aylett said he expects an increase in the number of audits the IRS conducts, but added if a non-compliant taxpayer completely and truthfully complies with the rules, the agency tends to not apply additional penalties or seek criminal prosecution.

    Although there is no specific guidance from the IRS following the end of the disclosure program, Aylett said he recommends filing tax and information returns from each year from 2003 to 2010.

    Regular filing in the U.S. does not usually result in paying more taxes. The foreign-earned income credit exempts up to US$92,900 of Canadian income. Because taxes are higher in Canada, the foreign tax credit also applies. The process is time-consuming, but necessary.

    While filing now carries a risk, Aylett said, the alternative is far worse.

    "The worst thing that can happen to a person that continues to be non-compliant is that the IRS discovers them and throws the book at them by assessing greater penalties than those that were available under the (Offshore Voluntary Disclosure) program."


    Obama can suck it.
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    Sep 23, 2011 2:04 AM GMT
    JackNWNJ said
    Upper_Cdn saidIgnorance no longer an excuse:





    Obama can suck it.
    That applies to YOU specifically.. Obama has nothing to do with this.. its been on the books for YEARS asswipe.
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    Sep 23, 2011 3:34 AM GMT
    There is nothing new about this. Nothing particularly unfair either.
    I filled out these forms for 16 years as an expat in Japan. There is a foreign earned income exclusion so about $80K was exempt.

    I had no intention of renouncing my U.S. citizenship and so it wasn't outrageous for the U.S. government to ask me to at least file a return. It isn't unfair to ask Americans in Canada to do it either.
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    Sep 23, 2011 2:37 PM GMT
    right on osakarob.

    I cannot imagine renouncing citizenship just to avoid filing or paying taxes to the country of my birth.



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    Sep 23, 2011 2:46 PM GMT
    barriehomeboy saidIt's coming back to me. You have to renounce your USA citizenship.


    Which many have done without issue.

    This isn't anything new. Why is this even news?
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    Sep 23, 2011 2:46 PM GMT
    MuchMoreThanMuscle saidThis is crazy! How can people of middle income backgrounds afford to pay income taxes to two countries?

    You don't have to necessarily pay taxes to both countries (tax treaties exist between the US and Canada). If you pay taxes in Canada, you can get a tax credit in th US, and vice versa. But you have to file a return.

    Last year, I sold property in Canada, paid my capital gains up there, and when I filed my US return, git a credit for the taxes I paid in Canada (and Quebec).
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    Sep 23, 2011 3:02 PM GMT
    I'm anti-IRS and support only a flat tax that would apply to anyone making purchases inside the U.S. So I say - don't pay these fucking crooks a dime.

    Being taxed for working? That's an ignorant idea.