# US Expat Taxation



## doudisj (May 12, 2010)

I am new to this forum. I have been in Canada since I was 3 years old. I have never worked in the US or filed a US federal or state tax return. I hold Canadian Citizenship and was born in California.

Am I liable for not filing US returns for the last 38 working? Does anyone know what kind of penalties and/or charges that I would be looking at? Could I be arrested at the border, or just turned away?

I had planned on a trip to California in July, should I reconsider.

Should I be looking at abandoning my US status?

Help!!


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## Bevdeforges (Nov 16, 2007)

Technically, you should have been filing US tax returns all this time, but you're far from the first person to find yourself in the situation you are in. Since you're resident in Canada, chances are you don't actually owe any taxes, thanks to the overseas earned income exclusion - which allows you to exclude the first $91K (or so, it changes year to year) of earned income (i.e. salary) from your tax calculation. It's not an automatic exclusion - you have to file for it - but for most folks it's adequate to reduce your tax bill to $0.

Abandoning your US status is tricky at the best of times. Unless you're horribly rich (in which case it's even trickier) I wouldn't consider it.

The IRS has a sort of amnesty program whereby you can voluntarily file the last 3 years' of tax returns (claiming the earned income exclusion) - and thereby "proving" that you don't actually owe any taxes. From that point onward, they'll expect a return from you each year (but normally with no taxes due). 

The easiest thing to do might be to contact the IRS office at your nearest US consulate. They can normally explain the program for filing the last 3 years and generally they're pretty helpful about these things. 

Oh, and for your trip to California, you do have a US passport don't you? I hear they're requiring passports to enter the US these days - and if you have US citizenship, you need to use your US passport.
Cheers,
Bev


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## Auld Yin (Mar 10, 2009)

doudisj said:


> I am new to this forum. I have been in Canada since I was 3 years old. I have never worked in the US or filed a US federal or state tax return. I hold Canadian Citizenship and was born in California.
> 
> Am I liable for not filing US returns for the last 38 working? Does anyone know what kind of penalties and/or charges that I would be looking at? Could I be arrested at the border, or just turned away?
> 
> ...


You are fortunate to hold dual citizenship, but are a resident of Canada. As you have never worked in USA and lived there only for the first three years of your life you are not required to file US tax returns. I assume you hold a Canadian passport which you will need to cross the norder.


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## Bevdeforges (Nov 16, 2007)

Auld Yin said:


> You are fortunate to hold dual citizenship, but are a resident of Canada. As you have never worked in USA and lived there only for the first three years of your life you are not required to file US tax returns. I assume you hold a Canadian passport which you will need to cross the norder.


Sorry, but that simply isn't true. As a US citizen, you are required to file tax returns no matter where you live or work in the world any year your worldwide income exceeds the threshold limits (depending on your filing status).

As a practical matter, there are lots of US citizens who have never lived or worked in the US who simply don't realize they have a filing requirement. In most cases, they don't actually owe any taxes, but they ARE very definitely required to file. That's one of the reasons the IRS has set up this "file the last three years and we'll call it even" policy.

It's best to keep your filings current. They sometimes catch up with you when you go to renew your US passport. Or, if you decide to move back to the US, especially with a non-citizen spouse, it will be necessary to get up to date with your filings.

And, BTW, it is illegal to enter the US on any passport other than your US passport if you have US nationality. They aren't normally too strict if you "accidentally" show your other passport, but if they notice your place of birth is the US, they can give you a very hard time. The penalties involved are pretty steep, too. 
Cheers,
Bev


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## doudisj (May 12, 2010)

Bevdeforges said:


> Technically, you should have been filing US tax returns all this time, but you're far from the first person to find yourself in the situation you are in. Since you're resident in Canada, chances are you don't actually owe any taxes, thanks to the overseas earned income exclusion - which allows you to exclude the first $91K (or so, it changes year to year) of earned income (i.e. salary) from your tax calculation. It's not an automatic exclusion - you have to file for it - but for most folks it's adequate to reduce your tax bill to $0.
> 
> Abandoning your US status is tricky at the best of times. Unless you're horribly rich (in which case it's even trickier) I wouldn't consider it.
> 
> ...


Good info, thank you. My concerns are that 2 of the last 3 years I was a little over the threshold, do I pay on the entire income to both Canada and the US, or just the amount over the threshold to the US, and all to Canada?

Also I read about if you have savings of over $10,000.00 and you do not claim it to the Treasury that you get a $10,000.00 fine yearly?

My passport is a Canadian one. Any info you can give would be helpful. I'll probably see a US Tax Attorney.

Thank you


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## Bevdeforges (Nov 16, 2007)

doudisj said:


> Good info, thank you. My concerns are that 2 of the last 3 years I was a little over the threshold, do I pay on the entire income to both Canada and the US, or just the amount over the threshold to the US, and all to Canada?
> 
> Also I read about if you have savings of over $10,000.00 and you do not claim it to the Treasury that you get a $10,000.00 fine yearly?
> 
> ...


No, you do not pay taxes to both the Canadian and US tax services. You must FILE a US tax return, but you get to exclude (on form 2555) the first $91K or so of earned income (i.e. salary) - so chances are you won't owe any taxes.

OK, you're also supposed to file a Treasury form listing your overseas bank accounts IF in total they amount to more than $10K. If you haven't been filing these, I'd start with filing the current one (i.e. for 2009) which is due at the end of June. If they are "concerned" about your overseas savings, they'll contact you to ask about previous forms and you can file them at that point. But unless you have fairly large bank or other financial account balances, chances are they won't bother you.

You really need to get yourself a US passport. Technically you are not allowed to enter the US on your Canadian passport and if the immigration folks notice that you were born in the US, you could run into some problems. Check the US consulate website, though - depending on how you are going to the US (air vs. driving) you may be able to use another form of i.d. for entry. 

If you arrive by air, you must show a passport, and in your case that means a US passport. I suspect they'll probably let you through with just a warning this time, but if you happen to hit an agent who's having a bad day, it could be worse than that.
Cheers,
Bev


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## MarylandNed (May 11, 2010)

I hold Canadian and US citizenship. I agree with Bev's advice on both the passport and tax issues. 

You will be expected to identify yourself as a US citizen when entering the US. The best way to do this is to carry a US passport. Things will be easier when returning to Canada but having a Canadian passport will make things even easier still. 

ADVICE: Get a US passport if you don't already have one. Use it when entering the US and also any time you're asked to present a passport before boarding a plane that departs from the US.

As for the tax issue, the US expects all of its citizens to file tax returns - even those who live outside the US. There are tax agreements with some other countries (including Canada) that prevents double taxation in most cases.


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