Real Costs Of Being A “Dual Tax Filer” In Canada And U.S.

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Written by John Richardson | Posted in U.S. / Canadian Dual Citizenship

The biggest cost of being a dual Canada/United States tax filer is the lost opportunity available to pure Canadians. Five major issues include:

The requirement to pay both U.S. and Canada. In many cases “Foreign Tax Credit Rules” mitigate potential double taxation, but it is common for “dual filers” living in Canada to pay taxes to the U.S.
The reporting requirements. While a “dual filer” living in Canada is required to report very little information to the Government of Canada, the U.S. requires a massive amount of information about Canadian assets to be reported to the IRS on an annual basis. There are severe penalties for the failure to report on these assets.
The direct costs of U.S. tax compliance. S. tax returns (including satisfying the “reporting requirements”) can easily exceed 100 pages and can cost thousands of dollars to prepare. Of course, the costs are significantly less for those who have simple lives and few assets. U.S. tax returns need to be considered separately from Canadian tax returns and must take into account items that are “taxable or reportable events” in the U.S. but not Canada.
U. S. tax rules interfere in the relationship between a U.S. citizen and a non-citizen (alien) spouse. There are tax implications to transferring assets to the non-citizen spouse in marriage or divorce. Being married to an American subjects you to “special rules”.
The opportunity cost – by far the biggest cost. A dual U.S.-Canadian citizen residing in Canada is deprived of many of the “normal” financial and retirement planning opportunities available to other Canadians. This is not immediately obvious. That said: it is the single biggest cost of being a “dual Canadian/U.S. filer”.

In order to find out how the U.S. dual filing process affects Canadian residents with: RRSPs, TFSAs, RESPs, Canadian Controlled Private Corporations, Individual Stock And Investment Portfolios, And The Principal Residence Exemption, read my future posts.

Have a question about dual U.S./Canadian citizenship?

Contact Tax Lawyer John Richardson At Citizenship Solutions.

John Richardson

The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a Toronto based lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.