As an American Citizen living in Canada it is likely that you are obligated to file a US Expat tax return every year. There are a number of forms you may be obliged to depending on your residency status, level of income and source of income.
If you have realized that you may be obliged to file a US tax return don’t panic. While the IRS are one of the few governments that tax citizens on worldwide income, there are a number of exemptions and reliefs that can be claimed upon.
The tax agreements between the US and Canada that are particularly work nothing are:
· Article X which provides a reduced rate of taxation on qualifying dividends
· Article XI provides for a reduced rate of taxation on qualifying interest income
· Article XV provides for an exclusion of qualifying income from dependent personal services.
· Article XVIII provides for a reduced rate of taxation on qualifying pensions
The savings clause should be taken into account when electing tax treaty provisions.
US tax filing requirements
Each year your US expat tax return is due on April 15th – for US Expats an automatic extension is given to June 15th. If the due date falls on a Saturday, Sunday or legal holiday the deadline is moved to the next business day.
The IRS requires you to report your worldwide income on your tax return. The provisions that will allow you to reduce- or even eradicate- any tax owed to the US includes Foreign Earned Income Exclusion, Foreign Tax Credit and Foreign Housing Exclusion.
Working in Canada and US Expat tax
If you work in Canada, you more than likely have to pay tax in Canada. Since Canada has a Totalization agreement with the US, the tax you pay to Canada can be offset on your US tax return as to avoid paying tax twice. Whether you have or haven’t paid tax to Canada you remain obligated to file a US expat tax return.
Taxation of Foreign income in Canada
If you are a resident of Canada, you will be taxed by the CRA on worldwide income. If you are a non-resident of Canada you are only required to report your income earned within Canada. These details can be reported on your yearly Canadian tax return, which is due April 30th.
You must complete your Canadian tax return in order to be able to file your US expat tax return.