2555 - TDF-90 US Income Tax filing for US citizen

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Date:           Sunday March 28, 2004
Time:           02:20 PM -0800
QUESTION:
I have lived in Canada for over 25 years and was told that I wouldn't have to consider reporting my income in Canada unless it exceeded $70,000 US or if I received some other type of income from a US source. I have never made enough money to have to report my income or received any other revenues from the US. Do I have to let them know what I make yearly anyway even if I don't owe anything to them ?
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david ingram replies:
Not exactly!
The rule is / was that if you earned less than $70,000 (now $80,000) overseas (and yes Canada is termed to be overseas) you did not have to pay tax to the US on the earnings but you DID HAVE TO FILE A US TAX RETURN TO "CLAIM THE EXEMPTION".
As an example, if you were earning $100,000 Canadian and has $35,000 Canadian income tax deducted, you do NOT have to file a Canadian Tax return because you have a refund coming and there is no Canadian tax return to file unless you want a refund of $3,500 or so.
However, if you do not file the 2555 EXEMPTION with a US tax return or a Federal Foreign Tax credit 1116 with a US 1040, at that point you WOULD owe the US some $18,000 US because you have not reported your Canadian income and claimed the exemption.
In addition, other reporting rules for Canadian bank accounts and RRSP accounts in particular can leave you liable for extensive penalties of up to $500,000 plus five years in jail.
Read the fine print at the bottom of form TD-F.90-22  - http://www.irs.gov/pub/irs-fill/f9022-1.pdf
Go to www.centa.com and read the August 2003 newsletter section for rules on reporting your RRSP to the IRS as well.  These RRSP rules have been made easier than implied in the August section but YOU STILL HAVE TO FOLLOW THEM or you will end up being traded like a terrorist with your money hidden in an offshore (remember that a Canadian RRSP is just as OFFSHORE to the US as Switzerland  or Bahamian trust accounts) account.
I (our office) would be happy to help you bring this up to date by mail, email, fax, courier or in person. Contact numbers are FURTHER below. In the meantime, Answers to this and other similar  questions can be obtained free on Air every Sunday morning.
Starting this Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet at
www.600AM.com 
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David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 
[email protected]
www.centa.com www.david-ingram.com
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
This from ask an income tax immigration planning and bankruptcy expert consultant guru or preparer  from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate gambling refunds for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,  Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
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