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April 5th. 2017

One of the fundamental differences between Canadian tax and US tax is the basis for taxation.

 

Canada taxes its residents on worldwide income, whereas, the US taxes not only residents, but also non-resident US citizens, on their worldwide income.

 

As a result, anyone who is a US Green Card holder (or who once was a Green Card holder, and did not formally relinquish their Green Card status, but simply allowed it to expire), and anyone who is a US citizen, is subject to US income tax.  If they are resident in Canada, they likely do not owe significant US income tax, unless they have income from US sources.  However, they are also subject to onerous foreign reporting requirements to the US government with respect to financial accounts outside the US and non-US companies.  Reporting for RESP’s is particularly painful, as two separate returns are required each year, simply to report the RESP, and the income generated inside the RESP is subject to US tax on annual basis.  The penalties for failure to file can quickly exceed $30,000 per year.

 

If you know anyone who was born in the US, or may have had a US Green Card, or whose parents are US citizens, remind them of their potential filing obligations.  The IRS is becoming extremely aggressive in tracking down non-filers.


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