IRS is looking to collect from canadians

[jjaycee98]

Those who have "enjoyed" dual citizenship with the USA are being being held to the fire to help out with their extreme debt, with the threat of seizing assets held in Canada.

They are all to file a US Tax return claiming their Income.

One client was born in Canada and his parents registered him as a Canadian/American dual citizen. With our high Canadian dollar his Income is worth more in US dollars than it would have been 10 years ago and therefore more likely to be a taxable situation.

 

[ironsides]

Only if he derives his income in the U.S. as well as living in the U.S. will someone have to pay. Duel citizenship by itself does not require collection of a duel income tax. There is more to the story than you released.

 

[lone wolf]

It's not the income taxes IRS wants to collect. It's the penalties for not filing.

 

[SLM]

The requirement to file and the requirement to pay are two different things.

In Canada the requirement to file and report income is based on residency. If foreign income is declared any foreign tax paid on that income is credited. I cannot imagine the US income reporting requirements are all that different.

At any rate, tax law is extremely complex and any kind of duel income reporting requirements would be best reviewed, if not prepared, by a professional.

 

[jjaycee98]

Uhhhhhm. No. They can and do Tax world wide Income. Canada Tax law says this also. You do get a credit for what you paid in the Foreign County but you are supposed to own up to Foreign Income on your Income Tax Return. Our is a "volunteering" of information, as long as CRA does not get wind of a Tax evasion situation. CRA could decide to actively pursue information regarding immigrants income from their country of origin also.

The difference here is that given the USA federal debt they are going to actively pursue collection. They are also threatening to put pressure on Canadian Banks to devulge what US citizens hold in bank accounts and RRSP accounts in Canada. Flaherty is saying that will not happen but there will be plenty of lawyers in the US that would jump at the chance to take this on, on behalf of their Government. Gets the heat turned away from them and how little they are paying.

 

[ironsides]

It's not the income taxes IRS wants to collect. It's the penalties for not filing.

No reason to file if you have not made money in the U.S., and do not live here.


A nonresident files a special tax form, pays tax only on U.S. source income, is subject to special rates, and might qualify for treaty exemptions. Conversely, if you are a resident for U.S. tax purposes, you are under the same rules and file the same forms as a U.S. citizen. That means you pay tax on your worldwide income rather than just U.S. source income.
http://www.ustaxhelp.com/residency_status.asp

 

[lone wolf]

Maybe IRS needs a Department of Transparency?

U.S. tax evasion crackdown unfair to Canadians: Flaherty - CTV News

Even the bigwigs here hear it the same way....

 

[EagleSmack]

Yup... that's our IRS. Remember my Canadian friends, that money that those Canadians earned belongs to the IRS. They are like Wild West Bounty Hunters or Mafia Leg Breakers.

 

[lone wolf]

Revenue Canada isn't much better. They're never wrong. Ask 'em.... They'll tell ya.... ;-)

 

[Andem]

This is nothing new. Any person who is a US citizen is liable to file tax returns in the US, regardless of where that citizen is residing.

>> Duel citizenship by itself does not require collection of a duel income tax.

Wrong. There are two countries on the planet that require you to file tax returns regardless of residency. The US is one of them, the second slips my mind at the moment.

>> I cannot imagine the US income reporting requirements are all that different.

The rules are actually very different. See above and below.

In general though you are not required to pay taxes (but are required to file them regardless) if your income exceeds $80,000 USD per year, though double taxation exemptions apply with some countries, with the difference of what is paid in country of residence minus what the US tax rate is going to the IRS.

IE. Let's say your income is $100,000 and you are a US citizen. You reside in Malta where the tax rate is only 15% and the US tax rate for that bracket is 30%. The US citizen would be liable to pay (first) Malta $15,000. The US says he owes $30,000. Since Malta and the US have a double taxation treaty, and because the income exceeded $80,000, the US would demand the citizen pay $15,000 to the IRS -- The US would subtract the $15,000 that he paid to Malta from the $30,000 he owes the IRS.

 

[Ron in Regina]

Wow.....things are starting to make sense to me with a buddy of mine whose citizenship
changes with respect to the country he happens to be working in. Always duel citizenship
with one of the countries being Scotland (his company banks there) and the other being
wherever he's working, be it Nigeria or Seria or Turkey or Saudi Arabia or one of the many
Somethingistan's. This is a guy I grew up with here in Saskatchewan (Canada) who was
working for a Texas (U.S.) company but physically on the other side of the planet, and
would work things out so that he was out of Canada at least 1/2 the year plus a day...and
had no paper ties back to Canada. No a Mortgage, cable bill, nothing.

 

[Kreskin]

If they cut off Social Security payments to all the wealthy Americans living on BC gulf islands they'd balance the budget overnight.

 

[Andem]

>> Wow.....things are starting to make sense to me with a buddy of mine whose citizenship
changes with respect to the country he happens to be working in.

A member of my immediate family has lived across the planet heading companies in South Africa, 10+ years in the US, British Columbia, Russia and anywhere raw material can be found. I never questioned why him and his family never took up US citizenship.

 

[The Old Medic]

Unless the person either: 1) lives in the United States or claims residence in the USA or 2) derives some or all of their income in the United States; they can not be assessed income tax in the USA. BUT, far too many people, including Canadians with dual citizenship, are hiding some or all of their income behind banking secrecy laws, etc. The US is cracking down on this (as they should have long ago).

As Benjamin Franklin said, back when he still supported the British Government, "The only things certain are death and taxes."

 

[Andem]

Unless the person either: 1) lives in the United States or claims residence in the USA or 2) derives some or all of their income in the United States; they can not be assessed income tax in the USA. BUT, far too many people, including Canadians with dual citizenship, are hiding some or all of their income behind banking secrecy laws, etc. The US is cracking down on this (as they should have long ago).

As Benjamin Franklin said, back when he still supported the British Government, "The only things certain are death and taxes."

Wrong. Read above.

I'm embarassed that this thread is filled with so much misinformation.

You may be a citizen of both the USA and Canada, but if you aren't filing tax returns to the IRS, you are breaking the law and can be criminally prosecuted if you return to the US, or by extradition from countries where tax evasion is a criminal offense (Canada, yes, Switzerland, no). Source, random Google search

** edit: Sorry, I just noticed you live in the US. If you ever do decide to live in Canada, you are required to file and pay US taxes until you die or renounce US citizenship.


>> BUT, far too many people, including Canadians with dual citizenship, are hiding some or all of their income behind banking secrecy laws, etc. The US is cracking down on this (as they should have long ago).

Please give us some real numbers with sources! I can't even count on one hand of any Canadian I know who has any knowledge of bank secrecy laws. It's automatic to assume that Switzerland or Cayman Islands are the only known countries with bank secrecy, but the aforementioned aren't exactly "optimal tax regimes".

Who is the US to "crack down" on the laws of sovereign countries? Switzerland is one of the most democratic countries in the world. The United States has no right to "crack down" on people doing business in that country, outside of their own borders. Either way, tax law in the US is constitutionally questionable.

 

[SLM]

This is nothing new. Any person who is a US citizen is liable to file tax returns in the US, regardless of where that citizen is residing.

>> Duel citizenship by itself does not require collection of a duel income tax.

Wrong. There are two countries on the planet that require you to file tax returns regardless of residency. The US is one of them, the second slips my mind at the moment.

>> I cannot imagine the US income reporting requirements are all that different.

The rules are actually very different. See above and below.

In general though you are not required to pay taxes (but are required to file them regardless) if your income exceeds $80,000 USD per year, though double taxation exemptions apply with some countries, with the difference of what is paid in country of residence minus what the US tax rate is going to the IRS.

IE. Let's say your income is $100,000 and you are a US citizen. You reside in Malta where the tax rate is only 15% and the US tax rate for that bracket is 30%. The US citizen would be liable to pay (first) Malta $15,000. The US says he owes $30,000. Since Malta and the US have a double taxation treaty, and because the income exceeded $80,000, the US would demand the citizen pay $15,000 to the IRS -- The US would subtract the $15,000 that he paid to Malta from the $30,000 he owes the IRS.

Are there penalties associated with not filing at US tax return even if there are no taxes owing?

 

[JLM]

Only if he derives his income in the U.S. as well as living in the U.S. will someone have to pay. Duel citizenship by itself does not require collection of a duel income tax. There is more to the story than you released.

My first reaction was there is a bit of bullsh*t there. Starting rumours should result in banning! :roll:

 

[Andem]

Are there penalties associated with not filing at US tax return even if there are no taxes owing?

Well, yes and no.

Technically, there can be hefty fines if you don't file returns and there certainly have been many, including those that make less than $80,000 per year. But in reality, it can be comparable to how many expats are audited each year. I believe that if you make less to nothing, you wouldn't have to file, but I'm not very well versed on the point of earning nothing. Here's what I believe is the case with making a livable income:

If you did make a significant amount while living overseas (less than, or more than 80k) and the IRS found out about it, expect an audit, then penalties. If you were living abroad and working as a waitress with barely enough to scrape by, then I'd say an audit resulting in penalties is less likely... but neither situations are certain.

Either way, US citizens have always been liable to pay and/or file US taxes, regardless of whether the source of income is in the US, from anywhere else in the world or from outer space or whether the place of residence is the moon! Any income is taxable under US law.

 

[SLM]

Well, yes and no.

Technically, there can be hefty fines if you don't file returns and there certainly have been many, including those that make less than $80,000 per year. But in reality, it can be comparable to how many expats are audited each year. I believe that if you make less to nothing, you wouldn't have to file, but I'm not very well versed on the point of earning nothing. Here's what I believe is the case with making a livable income:

If you did make a significant amount while living overseas (less than, or more than 80k) and the IRS found out about it, expect an audit, then penalties. If you were living abroad and working as a waitress with barely enough to scrape by, then I'd say an audit resulting in penalties is less likely... but neither situations are certain.

Either way, US citizens have always been liable to pay and/or file US taxes, regardless of whether the source of income is in the US, from anywhere else in the world or from outer space or whether the place of residence is the moon! Any income is taxable under US law.

So that is quite different then, here penalties are associated with a tax liability ($0.00 taxes owing, no penalty) and I can't count the number of people we get at our firm each year that have mutiple years of returns to file.

I'm just trying to figure out how much of an impact, bottom line wise, that would have on the average pensioner, for example, who holds dual citizenship and resides in Canada. Obviously those with larger incomes that haven't filed would be more likely to face penalties and interest on top of back taxes.

 

[ironsides]

Maybe IRS needs a Department of Transparency?

U.S. tax evasion crackdown unfair to Canadians: Flaherty - CTV News

Even the bigwigs here hear it the same way....

"Canadian banks are also being targeted under the U.S. legislation. In three years, they'll face added tax on U.S. profits if they don't turn over the names of American customers."


How would Canadian banks know who is American unless they provided a address in the States. If it really bothers some who hold duel citizenship, just renounce U.S. citizenship if it hold no advantage to you. Bottom line is that those Cabadians who hold duel citizenship are not required to file a U.S. IRS form. What the IRS really is after is American's hiding illegal incomes in foreign banks.