Over the past year or so a lot has been written about Citizens of the USA living in Canada being required to file tax returns, and other documentation, with the Internal Revenue Service.
There is an abundance of information available – the problem is that it is constantly changing and, as of right now, I’m not sure that anyone really knows what needs to be done. In fact, we have discovered that many Canadian citizens are not even aware that they are also US citizens.
US Citizens
You are considered a US citizen if:
- You were born in the United States
- You have applied for a “Green Card” to work in the USA
- You have not surrendered your “Green Card” on emigration from the USA
- One of your Parents was born in the USA
- You meet the IRS “Substantial Presence Test”
Substantial Presence Test
Snowbirds in particular need to watch the number of days that they are actually in the USA. If the Substantial Presence Test exceeds 183 days, you may be considered a US resident for tax purposes.
|
Year |
# of days in USA |
Factor |
Substantial Presence Days |
|
2011 |
100% |
||
|
2010 |
33.33% |
||
|
2009 |
16.67% |
||
|
Total “Substantial Presence” Days |
|||
Filing Requirements
Foreign Bank and Financial Accounts (FBAR)
All US citizens require IRS form TD F 90-22.1 if your total holdings exceed $10,000. This form lists all the foreign financial bank accounts and holdings you own, individually or jointly. It is important to remember that you look at this from the IRS point of view. A foreign bank account would include all Canadian accounts. This form is not part of a US tax return and is to be filed separately no later than June 30th.
Foreign Account Tax Compliance Act (FATCA)
IRS Form 8938, Statement of Specified Foreign Financial Assets”, is a new foreign financial asset report that would be filed as part of your US tax return. While similar to FBAR, the requirements and information may be different.
US Tax Return
While the United States does want all this information on US citizens, they would also like you to file a US tax return. Requirements for tax filings between Canada and the United States are actually pretty simple. Canada requires all Canadian Residents to file a Canadian return, with the IRS requires all US Citizens to file a US return.
It is entirely possible, and in many cases probable, that Canadian residents who are also US citizens will have zero US Source income, and therefore no US income taxes. This however, does not appear to remove the requirement to file.
The Accounting Place will continue to investigate and collect the best information available in order to assist you, our clients through this potential minefield.
