While Ted Cruz may be doing everything to prove he is a "natural born" U.S. citizen despite being born in Calgary, his situation underlines how figuring out U.S. citizenship for tax purposes is not as simple as it seems. You can be born in another country, never set foot in the U.S. and still be considered a U.S. citizen.
If you need to file U.S. taxes, the time to ignore your filing obligations seems to be rapidly coming to an end. After much debate and a court case to try and stop it, the Foreign Account Tax Compliance Act (FATCA) came into effect in 2015 and the first information share between the Canada Revenue Agency and the IRS happened in September.
Last week, Canadian government plans for keeping better track of people coming and going from the U.S. were revealed. The driving purpose for the increased scrutiny will save the government millions of dollars in social benefits on those who shouldn't receive them because they are out of the country.
As expected, the court challenge to the Foreign Account Tax Compliance Act (FATCA) by two Canadians failed to stop the flow of information between the Canada Revenue Agency (CRA) and Internal Revenue Service (IRS) happening in the last half of September. Lawyers for the Canadians argued that the agreement was an unlawful use of the tax treaty and a violation of the Charter of Rights and Freedom and was unconstitutional but a Federal Court judge disagreed.
Under the FATCA rules, financial institutions are obligated to provide the IRS with information about accounts and holdings of U.S. citizens. Basically, the IRS is trying to make sure you are not hiding money overseas though Canada is hardly a tax haven. But there is more to this overreaching legislation that just tracking down deadbeat U.S. citizens.
As a Canadian living in the United States (legally -- I'm a permanent resident), Americans routinely ask me when I'm going to become a U.S. citizen. It's always interesting to watch their reactions when I tell them "no thank you." The simple answer is that don't want to run afoul of that greedy monster, the IRS.