Potential for massive IRS tax penalties still hangs over U.S. citizens living in Canada
Most people are unaware that the U.S. is the only country that imposes citizenship-based taxation on it’s citizens no matter where they live or where they earned the money. That means that U.S. citizens living in Canada pay taxes to both Canada and the U.S. They are required to disclose all financial accounts in foreign countries where that are more than $10,000. Failure to report these accounts comes with a penalty of $10,000 per account if not disclosing them was not a deliberate act and $100,000 for 50 percent of the value of all accounts not disclosed.
“While most U.S. citizens who are resident in Canada find that no U.S. income tax is actually owing due to offsetting foreign tax credits, the investment restrictions, compliance burden and costs of filing U.S. tax and information returns can be severe.”