Income tax for dual US-Canada

Subject:        Income tax for dual US-Canada citizen?
Expert:         taxman at centa.com
Date:           Wednesday November 22, 2006
Time:           12:24 AM -0500
QUESTION:
I was born in the USA but have resided in Canada my whole life.  I have
recently become a Canadian citizen, so I now have dual citizenship.
Assuming I continue to live and work only in Canada, am I obliged to pay US
income tax?
Thank you for your attention,
----------------------------------------
david ingram replies:
As long as you remain a US citizen you are obliged to file a US income tax
return.
In fact, there is more legal reason to file a US return than a Canadian
return if you are an employee with tax deducted at source.
Let me explain.  If you made a $100,000 salary in BC in 2005 and were a
single man with no RRSP or any other income or deductions, your tax would be
$27,836.00.  Typically, your employer would have deducted $28,300 tax and
another $1,600 or so EI and CPP.  If you filed a tax return, you would get
back $464.00.  Since you do not owe Canada tax, there is no requirement to
file for Canada if you do not want your refund unless the CRA actually
requests a return.
However, as a US citizen, you owe tax to the US on $100,000 Canadian.
Assuming you are single, if you do not file a return, you owe them about
$17,500 plus late filing penalties and interest.
However, if you file a return and claim the proper exemptions and foreign
tax credits, you would not owe anything.
If you have not been filing your returns, the proper thing to do is file the
current year and 6 back years.
The first one of these I really saw where the IRS "really" went after
someone was in 1995 when the IRS issued arbitrary assessments against my
North Vancouver client for $218.000 for 1986, 87 and 88 - i.e. 9, 8 and 7
years back.  By the time we had finished two years later, he had a $5,000
bill from me, and had lost his house, car and wife.
We actually got the bill reduced to $146.00 but it had cost him everything
and he is now living in Alaska.
-----------------------------------
If you give up your US citizenship to stop having to file US tax returns,
you are then banned from the USA.
-----------------------------------------
We, of course, are available to file the old returns.
==============================
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