Brand new Canadian chiming in

[farrous13]

for Canada (citizens, not sure about PRs)

it is recommended to file taxes even if someone declares his or her status as a non-resident.
There is a way to file taxes from overseas. Most Canadian expats recommend that.

Links18,

That is true. That is what we do.
As for the IRS, yes all US citizens and greencard holders have to report their worldwide income and have to file no matter where they are. There is a price to pay to be a global power

 

[Dejaavu]

I would assume it is best for PRs to file taxes since if they get issued RQ they can show NOAs and T4s etc.

As for Canadians living outside of Canada, my friends who live outside of Canada most of them just declared themselves non resident and didn't file anything to CRA.

 

[farrous13]

When your friends come back to Canada to reside, they will have to start doing all the taxes for the undeclared years. They pay nothing of course since they declared their status as non-residents. That's what I was informed by Canadian expats in UAE & Saudi Arabia.

I would assume it is best for PRs to file taxes since if they get issued RQ they can show NOAs and T4s etc.

As for Canadians living outside of Canada, my friends who live outside of Canada most of them just declared themselves non resident and didn't file anything to CRA.

 

[Dejaavu]

For sure.

US is the only developed country that requires its citizens to file taxes even if they do not live in the US.

Some of my friends who are dual US and Canada citizens are exploring the possibility of renouncing US citizenship because of costs associated with filing those taxes plus there are other issues such as inheritance tax. Say a US citizen who lives in Canada and his son or daughter gets inheritance from parents, they get taxed like 30% or more and they do not live in the US or never lived in the US...

 

[farrous13]

That's crazy.
However, is there a different tax bracket for US citizens living and earning income abroad? Would the US be able to track income abroad? Is there a deal between Canada & US regarding this matter?

For sure.

US is the only developed country that requires its citizens to file taxes even if they do not live in the US.

Some of my friends who are dual US and Canada citizens are exploring the possibility of renouncing US citizenship because of costs associated with filing those taxes plus there are other issues such as inheritance tax. Say a US citizen who lives in Canada and his son or daughter gets inheritance from parents, they get taxed like 30% or more and they do not live in the US or never lived in the US...

 

[keesio]

Would the US be able to track income abroad? Is there a deal between Canada & US regarding this matter?

Google "FATCA". Coming online this summer.

 

[Dejaavu]

Keesio,
I am so familiar with FATCA. I worked at a bank here in Canada.

Farrous13,

Most countries have double tax treaty with US so as to avoid double taxation. Canada has one with US. I believe that if you make less 90 k it is not issue since taxes tend to be higher in Canada than in the US.

The problem with US tax filing is that it is not very easy to do it, it is very complex and time consuming and costly esp if one lives outside of US since there is income from that country.

 

[Dejaavu]

Farrous13,
What FATCA does is it forces financial institutions in the world to provide information on bank account and other financial information to IRS of a US citizens. FATCA is going to cost a lot of money to banks and other financial institutions that banks in Europe are trying to avoid US customers. In Canada it is hard to do that since there are a lot of US citizens living here or some Canadian US dual citizens. Plus, US can easily access info in Canada than say in Europe or in Asia.

 

[farrous13]

Thanks keesio & Dejaavu,

I read the article. I believe the main concern, like you said, is the cost of the looking into profiles of US citizens or dual citizens in Canada and reporting it to Canada Revenue Agency and then subsequently to the IRS.

keesio, are you a US citizen. If you are, are you looking forward to renouncing your US citizenship? You don't need to answer it if you don't feel comfortable.

Farrous13,
What FATCA does is it forces financial institutions in the world to provide information on bank account and other financial information to IRS of a US citizens. FATCA is going to cost a lot of money to banks and other financial institutions that banks in Europe are trying to avoid US customers. In Canada it is hard to do that since there are a lot of US citizens living here or some Canadian US dual citizens. Plus, US can easily access info in Canada than say in Europe or in Asia.

 

[keesio]

Keesio,
I am so familiar with FATCA. I worked at a bank here in Canada.

Farrous13,

Most countries have double tax treaty with US so as to avoid double taxation. Canada has one with US. I believe that if you make less 90 k it is not issue since taxes tend to be higher in Canada than in the US.

The problem with US tax filing is that it is not very easy to do it, it is very complex and time consuming and costly esp if one lives outside of US since there is income from that country.

Yep. There is the FEIE where anything made below a certain threshold (somewhere around 90K) is tax exempt. And for income over that, there is the FTC which you can claim (basically offset your US taxes owed with all the Canadian taxes already paid). So even if you do make over 90K, there are several ways to bring the tax burden down so that what you owe to the US is not too bad. But Dejaavu is right on about it being complex to file, even if you don't owe anything. The FTC is a pain to figure out initially. Then you have all these various accounts where you may avoid taxes in Canada and there is a treaty to avoid paying US taxes but you have additional forms. Stuff for your RRSP, RPP, etc. And if you have a TFSA, there is another special form since the US can see it as a trust. Then there is Form 8938 and FBAR and other stuff to do. It's really complex and I pay almost 1K a year to my accountant to do my US taxes. As you can see, I am extremely frustrated by it all.

 

[keesio]

keesio, are you a US citizen. If you are, are you looking forward to renouncing your US citizenship? You don't need to answer it if you don't feel comfortable.

I must admit that the thought had crossed my mind. But I can't imagine it. Not only do I have too many ties there (I was born there and much of my family is still there) but so is my wife and all her family. We have not ruled out the possibly moving back to the US in the future. But if I lived in a country with a lower tax burden (like Singapore for example) where I would have to pay the diff in tax rates to the US, then I may consider it much more.

 

[Dejaavu]

Keesio,

My wife felt the same way. She is American. Now I am affected by it. Therefore eventually we might move to US so I can become a US citizen too at least I won't be bothered a lot by CBP officers how long I am coming for and whether I am trying to seek illegal employment