Attention U.S. citizens living in Canada:
An IRS amnesty is now in effect. U.S. tax filing is required.
Call 1-800-HRBlock to meet with one of our U.S. tax specialists before amnesty ends.
If you are a U.S. citizen resident in Canada, you are subject to exactly the same filing requirements that you would be subject to in the U.S.
This means you must file U.S. Form 1040 every year, reporting your worldwide income. This fact may come as a surprise to you if you have been accustomed to Canadian rules, which tax on the basis of residency rather than citizenship.
The net result is that if you are a U.S. citizen resident in Canada, you must file two returns each year: a Canadian return because you live here, and a U.S. return because you are a U.S. citizen. Fortunately, this does not necessarily mean you'll have to pay taxes to both countries. There are several mechanisms available to make sure you're not doubly taxed.
Forms to File
The 1040 form is the standard documentation for filing your income tax return to the Internal Revenue Service (IRS).
Besides filing an annual tax return, you may be required to submit documentation to the U.S. Treasury, as well. This form is called the FBAR for Foreign Bank Account Reporting. (http://www.irs.gov/pub/irs-pdf/f90221.pdf). Additional reporting is required if you own a Tax Free Savings Account, Registered Education Savings Plan or a Canadian corporation.
Earned Income Exclusion
You may be able to exclude up to $92,900 from income for U.S. tax purposes by completing Form 2555 and attaching it to your return. Form 2555 is a special form excluding foreign earned income from taxation in the United States. To claim this exclusion you must be a bona fide resident of Canada or must have been living in Canada for at least 330 days out of the last 12 months. You must also file your return on time.
In most cases, treaty benefits are not available to U.S. citizens because of Article XXIX, paragraph 2. This provision states that nothing in the treaty can prevent the U.S. from taxing its own citizens, except for those articles listed in paragraph 3. One of these exemptions is the article governing Social Security payments. This means that if you receive Social Security benefits from the U.S., these benefits are not taxable in the U.S. They are taxable only in Canada. You may claim a 15% deduction on Line 256 of your Canadian tax return.
Foreign Tax Credit or Deduction
Another way to avoid double taxation is by claiming a foreign tax credit on your U.S. return for taxes you are required to pay to Canada. To claim the credit, you must complete Form 1116 and attach it to your U.S. return. Alternatively, you can claim the Canadian taxes you paid as an itemized deduction. Both the deduction and credit are limited to foreign income that is subject to U.S. tax, so neither can be claimed for income excluded on Form 2555.
If you live outside the U.S., you have an automatic extension of two months to file your U.S. tax return. In other words, your U.S. return is due on June 15 each year, rather than April 15. This provides time for you to complete your Canadian return and determine your Canadian tax liability. This is needed in case you have to claim the foreign tax credit on your U.S. return. Note that while you have until June 15 to file your US tax return if you live in Canada, the IRS will begin assessing interest on any unpaid balances on April 15th.
We Know U.S. Taxes
At H&R Block, our tax professionals know the tax laws on both sides of the border.
With H&R Block’s experienced tax professionals, you can be assured that your Canadian and U.S. tax returns are prepared accurately and professionally.
U.S. tax services:
- preparation of U.S. federal and state income tax returns for you and your family
- U.S. tax calculations
- U.S. and Canada treaty benefits
- coordination of U.S. and Canadian deductions and credits
- assistance with correspondence from the Internal Revenue Service
Drop in or call us to discuss your U.S. tax return. Use our Office Locator to help you find the office nearest you.
Internal Revenue Service - U.S. Department of the Treasury
Social Security Online - The official website of the U.S. Social Security Administration
U.S. Consulates General
U.S. Citizenship and Immigration Services