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Duties of a US citizen in . - Canadian-USA-Global tax help -


Dear Mr. Ingram,


I am interested in finding out if there is   US income tax levied on individuals who have dual US / Canadian citizenship and who are permanently residing and working in Canada .  If so, is the tax a flat tax (what would the % be?) or is it progressive based on one’s income? If it is progressive, can you tell me what the income brackets and the associated levels of taxation would be?


Would having a US bank account, 401K, Roth IRA and US credit cards have tax implications for an individual in the scenario outlined above?


What would be your fee to advise me of the above?


Thank you,
david ingram replies:

Any US citizen or green card holder living in Canada must continue to file US tax returns as long as they remain a US citizen.  It does not matter if that US citizen is living in Ethiopia, Saudi Arabia, Greece or Australia either.  US citizens and green card holders must file US tax returns no matter where they live or no matter where the money comes from.

go to and read the Oct 93 newsletter on Dual citizenship and the Oct 1995 newsletter on what A US CITIZEN LIVING IN CANADA MUST DO.

THESE TWO NEWSLETTERS can be found int eh top left hand box.

I charge $450.00 for this type of consultation in person or by phone.  If you are in the US during a phone consult, there is no GST.  If in Canada, it becomes $472.50.

The following is a reprint from my 1991 Ultimate Tax Book.  Although rates will be a little different, the method is the same.

US/Cdn Taxation

Financial SCAM
Alien Commuters
Cdn/US Social Security
Entering The US
Legal Expenses
Lost US Citizenship
SIN # for Children
US/Cdn Taxation
Bill Vander Zalm - former premier of BC on Around the World with David Ingram

Whether your particular venture fails or succeeds, it is still your name that appears at the bottom line of the contract, and it is you and not your consultant that will succeed or fail with the venture.

It is your duty to yourself to take the time to bother with your business affairs. It is your duty to yourself to investigate any possible investment, and to realize that if you act hastily you may be robbed in the same way as Aunt Gertrude, who keeps wondering why her 3% guaranteed perpetual bonds are not keeping up with inflation. - david ingram

David Ingram
Garth Turner
(author of the book
"Greater Fool - The Troubled Future of Real Estate")
discuss "Nothing Down - No Future"

Around the World with David Ingram - Weekly Talk Show

It's Your MONEY!
 david ingram and
Fred Snyder
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Canadian Taxes, U.S. Taxes, Visas and Immigration, British Columbia Income Tax,
Real Estate 

To Reside or Not


excerpt from

david ingram's 
Jan 20, 2001



 (or any other country)

Every U.S. citizen or "green card" holder living out of the U.S. (i.e., in Canada) must continue to file U.S. income tax, gift and estate tax returns. They may exempt up to $72,000 U.S. of "earned" income, but if they have more than $72,000 of earnings or any amount of interest, dividends, rents, royalties,  or pensions, they must file a U.S. income tax return and use a form 1116 (foreign tax credit) to claim credit for the taxes paid to Great Britain or Canada or Iceland, or Libya, or Borneo. (Note that the $72,000 figure was $70,000 prior to 1998).


This is a very important matter.  In our US "working visa" practice, we counsel our clients on their US and Canadian tax liabilities when they are going to work in the USA.  We find that most (certainly 95%) of the Canadians who get US working visas are given incorrect or at least incomplete advice about their US tax liabilities.  For instance, a North Vancouver company sent over 200 employees to the US on TC and TN visas.  The individual employees were being paid from Canada and were all filing Canadian returns and not paying tax to the USA where their first liability was when they were performing the service in the USA.

US taxation is based upon where you perform the work.  Where you "claim" to work is not important.  Now, if you work in California and live in Vancouver with your spouse and children and earn LESS than $10,000 US, there will likely be no US FEDERAL tax liability because of the US / Canada Income Tax Treaty.  However, there WILL be a California income tax liability.

This chapter was new for the seventeenth (1990) edition of my Canadian Income Tax Preparation book. It came up because of the number of clients I have who are "out of the country." At any moment, I have over 500 clients who are Canadians living in Barbados, Fiji, Australia, New Zealand, New Guinea, Hong Kong, Saudi Arabia, Kuwait, France, Brussels, and another 50 countries. As well, they live in at least 20 of the U.S. states such as California, Alaska, New York, West Virginia, Nevada, Hawaii, Florida, North Carolina, Tennessee, Washington, Virginia, and Arizona.   Note that some states have no (or limited) state income tax. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state tax.  Tennessee has tax on interest and dividends only.  New Hampshire taxes proprietorship business income.  And, by the time you read this, there will be changes.  North Carolina, for instance is making noises about getting rid of its intangible personal property tax (tax on receivables, etc. - yuk).

Then, of course there are those who live and work on deep sea oil drilling platforms, or work as sailors on Great Lakes freighters (one such fellow sailed between  or Air Crew on Qantas, Canadian Airlines International, Air Canada, BOAC, LIAT, etc., and based in Amsterdam, Sydney, Honolulu, Seattle, or Auckland, New Zealand).  

And I shouldn't forget people who live in the United States and have property in Canada which they rent out or have made an investment in a brother's Canadian business or a Canadian ski (or even "all season" resort).  

Some of our clients have Xmas tree farms in Northfield, Minnesota, orange groves in Florida, and almond plantations in California.  Others are Finish citizens who live in Germany and work part of the year in the U.S. and part of the year in Canada. My favourite client (sorry everyone else) is likely a U.S. citizen with a wife in North Vancouver and businesses in the Philippines, New Zealand and Washington State.  On his last visit, he brought his 84 year old American mother from Seattle.  Wife, mother and client were flying off to Manilla the next day and mother was worried because the Sears store at Capilano mall had turned down her Gold Visa Card. "What was she going to do for money on her trip?"  A call to her trust officer in Seattle ascertained that her card was okay and NO AUTHORIZATION HAD BEEN ASKED FOR BY SEARS. We had no trouble getting an approval through our own VISA account, so it must have been the SEARS computer system. However, this dynamic lady, who had $800,000 U.S. on deposit in her accounts, was embarrassed and distraught, and it will be a long time before she shops at SEARS again.  

Then there are the soccer players, the hockey players, the basketball players, the seminar presenters,  the Hollywood actors, the Ice Capades skaters, and the odd South American or European or Iranian refugee and the question always arises, "who is going to tax them?" In the case of a Hockey player like Wayne Gretzky, he has to file a "state" tax return in every state in which he played hockey or makes a personal appearance, likely about 22 states.  

Canadians usually compare their combined federal and provincial taxes to the basic federal U.S. taxes without thinking about the state taxes and extra medical costs. Although some states have NO personal income tax, most do.  "Some" (there are over 6,000 current forms) forms and information are given here:  

State            Tax form Number

Alabama          40

Alaska *         No personal state income tax form (estate /corp yes)

Arizona *            140

Arkansas *            1000

California *         540

Colorado *            140

Connecticut *            CT-1040

District of Columbia     D-40

Delaware         200-01

Florida *            No income tax (is tangible personal property / estate / corp  tax)

Georgia *            500

Hawaii *         N-12

Idaho *               40

Illinois *            IL-1040

Indiana *            IT-40

Iowa             1040

Kansas *         40

Kentucky *            740

Louisiana *          IT540

Maine                 1040ME

Maryland *            502 plus city and county taxes

Massachusetts *      1

Michigan *            MI-1040 plus 12 city tax returns

Minnesota *          M-1

Mississippi *            62-101

Missouri *            M)-1040

Montana *            2

Nebraska *            1040N

Nevada *         No state income tax (is a $25 / employee business return)

New Hampshire *     1040 for business proprietorship only

New Jersey *         1040

New Mexico *         PIT-1

New York *            IT-201 plus New York City / Yonkers city returns

North Carolina *       D-400

North Dakota *         37

Ohio *                IT-1040

Oklahoma *            511

Oregon *         40N

Pennsylvania *           PA40R plus Philadelphia city return

Puerto Rico         No individual income tax return

Rhode Island           RI-1040

South Carolina *       SC1040

South Dakota           No Individual income tax return

Tennessee *          RV-0368 - only interests and dividends included

Texas *               No individual income tax return (are estate / corp taxes)

Utah *                TC-40

Vermont *            103

Virgin Islands      No personal, corp, estate, income taxes

Virginia *            760

Washington *         No personal income tax (estate/personal prop / yes)

West Virginia *       IT-140

Wisconsin *          1

Wyoming *            No personal, corporation or estate taxes

(*) denotes we have recently prepared returns involving this state)

Note that state income taxes range from none to a high of about 10% in California.

The personal property taxes are important as well.  In the state of Washington, for instance, you can easily get a retroactive $5,000 personal property tax bill on the boat you have kept there for the last 4 or 5 years.  Licensing your new Cadillac in the state of Washington will cost you an extra $600 a year in personal property taxes.


It used to be that people who lived in the United States and worked in Canada paid no tax to the U.S. because the higher Canadian income tax meant that the U.S. resident got credit for every cent by filing the Form 1116 and claiming a foreign tax credit. That is no longer true if the total income (after the "up to" $72,000 exemption) is over $45,000 for a family or $33,750 for an individual or $22,500 for a married person filing separately. The Alternative Minimum Tax (Form 6251) means that only 90% of the foreign tax credit can be claimed. (Note, AMT kicked in at $40,000, $30,000 and $20,000 from 1987 to 1993 - It is now $22,500, $33,375, and $45,000 for 1994, 1995,   1996, 1997 and 1998).  

If you are a U.S. citizen who has not filed your past returns, you should catch up your returns from 1987 to the present.  We regularly prepare 1987 to 1998 returns for U.S. citizens who have been "caught" or who are just trying to catch up legitimately.  

For example, in a 1990 return for a man earning $70,000 in Canada and a woman earning $10,000 in the U.S., their Alternative Minimum Tax worked out to about $500.00 U.S. However, if she had made $20,000 in the U.S., there would have been enough U.S. Tax paid that the Alternative Minimum Tax would not have kicked in. Since the 1991 rate for the AMT is going from 21% to 24%, it is expected to more than triple the number of people who will be caught in this situation. Persons in this situation should plan on making sure that they have some U.S. income to knock out the AMT in the U.S. In the above case, I had prepared the return and sent it in, before another return pointed out to me that there was a tax liability under AMT and I had to phone the couple and say "mea culpa".  

Note that the AMT is 26% for 1993 and 1994, 1995, 1996, 1997, 1998, and 1999.  


What country is going to tax them?  

The answer is not always easy. I am going to quote directly from the U.S. / Canada Tax Treaty because that is the one we use most often, but the same general rules apply with all treaty countries. At the moment, Canada has signed treaties with 78 countries and is working on another 27. We have had several cases where people have already paid $16,000 or $25,000 in tax to Canada because they are clearly residents under most meanings. However, because of the following "TIE BREAKER" rules, we are getting back all tax paid on dollars earned in the other country.  


There are many, many treaties.  The articles tend to be fairly consistent so that when some one comes in from Indonesia, I am able to quote Articles IV, IX, X, and XI etc., and look like a real expert on Indonesia, even if I have not looked at it before.  The following ARTICLE IV for instance has been used by myself more often for Australia and Germany than for the United States.

Please also note that a NEW US / CANADA TREATY was signed on August 31, 1994 and with various changes took effect on Jan 1, 1996. Parts of it (estate and capital gains) are retroactive back to November 10, 1988.  This new Treaty totally changes the rules between the two countries for estate and capital gains tax upon death. It also completely changes the rules for the taxation of U.S. Social Security, Canadian Old Age Pension and Canada Pension Plan. Gambling losses are going to be allowed for Canadians as well.  See the December 1995 edition of the CEN-TAPEDE for more information.  

The "boxed" parts of the following treaty following are the parts taken out as of  January 1, 1996.  The treaty as printed is as it should be now. It was slightly different 1980 to 1995.  

Article IV - Fiscal Domicile - (it is the same number in most treaties)  

1980 to 1995. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management, or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State in respect only of income from sources therein.

1996, 1997, 1998 & 1999. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of that person's domicile, residence, citizenship, place of management, place of incorporation or any other criterion of a similar nature, but in the case of an estate or trust, only to the extent that income derived by the estate or trust is liable to tax in that State, either in its hands or in the hands of its beneficiaries. For the purposes of this paragraph, a person who is not a resident of Canada under this paragraph and who is a United States citizen or alien admitted to the United States for permanent residence (a "green card" holder) is a resident of the United States only if the individual has a substantial presence, permanent home or habitual abode in the United states and that individual's personal and economic relations are closer to the United states than any other third State.  The term "resident" of a Contracting State is understood to include:

(a) the Government of that State or a political subdivision or local authority thereof or any agency or instrumentality of any such government, subdivision or authority, and

(b) (i) A trust, organization or other arrangement that is operated exclusively to administer or provide pension, retirement or employee benefits, and

    (ii) A not-for-profit organization th