By some estimations there may be as many as 2 million American citizens currently living across the northern border in Canada. Whether it be an employment based moved, owning property or virtually any other reason, the political and economical relationship held between the US and Canada makes a temporary or long term move relatively easy and quite common. Whatever the reason for moving to Canada, there are some tax related items that American citizens or residents need to be aware of in order to maintain good standing with the IRS. Two of those that we will highlight here have to do with general tax filing requirements and the declaration of foreign banks accounts.
This is general information. We are not tax experts and we recommend consulting with a tax attorney or accountant regarding your specific situation when moving to Canada or another country.
Bear In Mind When Moving To Canada
Firstly, it is important to understand that, even though you are living and working in another country, you will most likely be required to file taxes in the US. This does not necessarily mean that you will need to pay taxes there, but you must file. This also applies to dual Canadian and American citizens. The two countries have working agreements meaning that workers will generally not be required to pay taxes in both countries, if you are making money in Canada and paying Canadian income tax, you will not be required to pay US income tax on that same income. But, reporting and filing is still required. This can become slightly complicated come April 15 every year, so we recommend consulting a tax expert to ensure you remain compliant and do not over, or under pay taxes in either country.
There is also another form that US citizens in Canada may be required to file, that being the FBAR, or the Report of Foreign Banks and Financial Accounts. Under the US Bank Secrecy Act, citizens must file this form if, at any time during that calendar year, they had a total of $10,000 US in foreign bank accounts or financial institutions. Bear in mind that this means a total holding amount, not just one account. Again, this requirement will not necessarily mean needing to pay taxes on that amount, but US citizens living anywhere must report these foreign bank holdings.
These are examples of just two issues that Americans living in Canada or other countries need to be aware of come tax time. Moving to Canada, or other international moving destinations does not mean taking double hit on your income taxes, but there are certain reporting requirements that need to be adhered to. Since these laws are subject to change, we recommend securing the services of a professional tax accountant or attorney in order to maintain good status and to give yourself that peace of mind.