The new administration in the U.S. may be talking about changes to the tax system and rates but none will be made in time to affect 2016 tax returns. For the estimated one million U.S. citizens living in Canada who may be required to file a U.S. tax return, there are a few changes that could have an impact when they send their paperwork to the IRS.
Unlike the Canadian tax system, the U.S. system is based on both citizenship and residency. It means that even if they leave the country to live elsewhere, U.S. citizens may have tax filing obligations with the IRS. In many cases, U.S. citizens didn't realize they needed to file tax returns after they left the country.
For U.S. citizens and green card holders living outside of the United States, the deadline for filing their U.S. taxes or requesting an extension was June 15. But like most things related to U.S. taxes, it is not that simple. There are additional filing requirements related to foreign assets and financial accounts that also need to be considered.
If the possibility of Trump or Clinton becoming president may make you think about leaving the country, there are some things to consider beyond just immigration rules if you want to come to Canada.
Death and taxes; two of life's unwelcome certainties. Whenever facing a stressful task, breaking it down into chunks and focusing on each practical step separately can be immensely beneficial. That's why I recommend using the "planning backwards method" when approaching tax season.
The Internal Revenue Service (IRS) has rules for tax preparers and which ones can contact them on behalf of a client. It means if you want your tax preparer to handle anything with the IRS on your behalf, they need to have specific qualifications.
There are thousands of Accidental Americans in Canada who hold U.S. citizenship that they don't necessarily want or even know they have. Renouncing your U.S. citizenship does not negate your obligations to the IRS but you can expatriate without being tax compliant.
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 are a U.S. citizen living in Canada or you are a Canadian with U.S. tax filing obligations, make sure you understand how your TFSA and RESP will be impacted. You may want to look at different investments to help minimize your U.S. tax reporting requirements.
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.