Canadian – US Citizens

Since some, US citizens living in other countries have not complied with their US income tax filing and reporting requirements, the IRS recently announced new procedures that came into effect on September 1, 2012. The procedures may provide relief from penalties if you are a US citizen living in Canada and have been unaware of your US income tax obligations and owe a minimal amount of US income tax.

To benefit from these new procedures, you must be a US citizen who has lived outside of the US since January 1, 2009 and has not filed a US individual income tax return during that period. To take advantage of these new procedures, you will be required to submit to the IRS that includes: three years past due tax returns, FBARs for the past six years and a completed IRS questionnaire. IRS indicated that they will not likely impose penalties on taxpayers who they determine to be a low compliance risk. Among other criteria, the IRS has that simple income tax returns that show less than US$1,500 in tax due in each of the past three years will generally be treated as low risk. Individuals with a higher risk level may be subject to a more thorough review and possibly a full examination by the IRS. Factors that may increase your level of compliance risk include the use of sophisticated tax planning or avoidance techniques and claims for refunds in any income tax returns submitted through the program. It should be noted that the Offshore Voluntary Disclosure Program (OVDP), which offers another means for US tax filers to become compliant, will not be available to anyone who makes a submission under these new procedures. As such, it is important to consult with a cross-border tax professional to determine the best course of action for your specific circumstances.